Equity method journal entries (price greater than book value) An investor purchases a 30% interest in an investee company, and the investor concludes that it can exert significant influence over the investee. The book value of the investee's Stockholders' Equity on the acquisition date is $800,000, and the investor purchases its 30% interest for $312,000. The investor is willing to pay the purchase price because the investee owns an unrecorded (internally developed) pate that the investor estimates is worth $240,000. The patent has a remaining useful life of 10 years. Subsequent to the acquisition, the investee reports net income of $180,000, and pays a cash dividend to the investor of $13,000. At the end of the first year, the investor sells the Equity Investment for $390,000. Prepare all of the required journal entries to account for this Equity Investment during the year. General Journal Description Debit Credit Equity investment 1,000 Cash 312,000 To record purchase of investment. 54,000 Equity income 54,000 To record equity income Cash 3,900 X Equity investment 3,900 To record receipt of cash dividend Equity income 7,200V Equity investment 7,200 To record amortization expense. Cash 390,000 Gain on sale 35,100 x Equity investment 354,900 X To record sale of investment