comprehensive problem 12-16 part 5

Project Description:

mr. marino's purchase of the stock of lifepath fitness was done through his business. the stock investment has always been accounted for using the cost method on his firm's books. however, early in 2014 he decided to take his company public. he is preparing an ipo (initial public offering), and he needs to have the firm's financial statements audited. one of the issues to be resolved is to restate the stock investment in lifepath fitness using the equity method, since mr. marino's ownership percentage is greater than 20%.

(e) (1) give the entries that would have been made on marino's books if the equity method of accounting for investments had been used since the initial investment. assume the following data for lifepath.
2011 2012 2013
net income $30,000 $70,000 $105,000
total cash dividend$2,100 $20,000 $50,000

(2) compute the balance in the stock investment account (as it related to lifepath fitness) at the end of 2013.
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