Concept #1: Significant Influence and the Equity Method

Concept #2: Purchasing Equity Method Investments

Concept #3: Investment Income for Equity Method Investments

Concept #4: Investment Loss for Equity Method Investments

Concept #5: Dividends Received for Equity Method Investments

Concept #6: Calculating Book Value of Equity Method Investments

Concept #7: Gain on Sale of Equity Method Investments

Concept #8: Loss on Sale of Equity Method Investments

Practice: On January 3, Johnson Corp acquired 35% of the outstanding common stock of Small Company for $350,000. For the year ended December 31, Small Company reported net income of $150,000 and paid cash dividends of $70,000 on its common stock. At December 31, the carrying value of Johnson Corp’s investment in Small Company under the equity method is:

Practice: On January 4, The Jones Company purchased 35,000 out of the 87,500 outstanding shares of Miller Company for $400,000. During the year, the Miller Company reported net income of $240,000 and paid cash dividends of $60,000, while the Jones Company reported net income of $450,000 and paid cash dividends of $80,000. What is the carrying value of Jones Company’s investment in Miller Company at the end of the year under the equity method?

Practice: GT Company owns 9,000 of the 48,000 shares of outstanding common stock of Bell Company. GT Company should account for this investment using the: