On January 1, 2007 Doe Company purchased 3,000 of the

On January 1, 2007 Doe Company purchased 3,000 of the 10,000 common shares outstanding of the Ray Company for $15 per share and obtained significant influence. Doe amortizes its patents over 10 years. The December 31, 2006 condensed balance sheet of the Ray Company is shown here:


On January 1, 2007 Doe Company purchased 3,000 of the


Doe Company was unable to determine the fair value of the Ray Company identifiable net assets shown on the preceding balance sheet. It did, however, determine that Ray Company uses the straight-line method (no residual value) to depreciate its fixed assets and to amortize its patents over 20 years and 10 years, respectively. At the end of 2007 Ray Company disclosed the following condensed income statement and retained earnings statement for 2007:

On January 1, 2007 Doe Company purchased 3,000 of the


Required
Prepare all the 2007 journal entries that Doe should make related to this investment. Show and label all supportingcalculations.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...