On 1 January 20X5, Zan Company purchased 6,500 of the 26,000 outstanding common shares of Woo...

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On 1 January 20X5, Zan Company purchased 6,500 of the 26,000 outstanding common shares of Woo Computer Corp. (WC) for $93,000 cash. Zan had significant influence as a result of the investment and will use the equity method to account for the investment. On 1 January 20X5, the statement of financial position of WC showed the following book values (summarized): Assets not subject to depreciation Assets subject to depreciation (net) Liabilities Common shares Retained earnings *Fair value, $131,900; difference relates to land. $116,300* 93,000++ 30,900 **Fair value, $108,600, estimated remaining life, 5 years. 139,100 38,600 Assume there is no impairment of goodwill. Additional subsequent data on WC are as follows: 20X5 20x6 $30,900 $48,900 Earnings Cash dividends declared and paid Fair value per share 20,900 $ 13 $ 36,900 24 Required: 1-1. Provide the investor's entries or give the required information for: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) a. Entry at date of acquisition. c. Entries at 31 December 20X5 to recognize investment revenue and dividends. d. Entries at 31 December 20X6 to recognize investment revenue and dividends. View transaction list Journal entry worksheet 1 2345 Record acquisition of investment. > Note: Enter debits before credits. Transaction a. General Journal Debit Credit 1-2. Indicate the amount of goodwill purchased. Goodwill purchased 2. Are any entries needed to recognize a writedown to fair value at the end of 20X5 or 20X6? Yes No 3. Reconstruct the investment account, showing the opening and closing balances and all changes in the account. Investment Account (Equity Method) Acq Bal. 4-1. How much investment revenue would be reported each year if the cost method was used? 20X5 Investment revenue 20X6 4-2. What would be the balance in the investment account? Balance in the investment account On 1 January 20X5, Zan Company purchased 6,500 of the 26,000 outstanding common shares of Woo Computer Corp. (WC) for $93,000 cash. Zan had significant influence as a result of the investment and will use the equity method to account for the investment. On 1 January 20X5, the statement of financial position of WC showed the following book values (summarized): Assets not subject to depreciation Assets subject to depreciation (net) Liabilities Common shares Retained earnings *Fair value, $131,900; difference relates to land. $116,300* 93,000++ 30,900 **Fair value, $108,600, estimated remaining life, 5 years. 139,100 38,600 Assume there is no impairment of goodwill. Additional subsequent data on WC are as follows: 20X5 20x6 $30,900 $48,900 Earnings Cash dividends declared and paid Fair value per share 20,900 $ 13 $ 36,900 24 Required: 1-1. Provide the investor's entries or give the required information for: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) a. Entry at date of acquisition. c. Entries at 31 December 20X5 to recognize investment revenue and dividends. d. Entries at 31 December 20X6 to recognize investment revenue and dividends. View transaction list Journal entry worksheet 1 2345 Record acquisition of investment. > Note: Enter debits before credits. Transaction a. General Journal Debit Credit 1-2. Indicate the amount of goodwill purchased. Goodwill purchased 2. Are any entries needed to recognize a writedown to fair value at the end of 20X5 or 20X6? Yes No 3. Reconstruct the investment account, showing the opening and closing balances and all changes in the account. Investment Account (Equity Method) Acq Bal. 4-1. How much investment revenue would be reported each year if the cost method was used? 20X5 Investment revenue 20X6 4-2. What would be the balance in the investment account? Balance in the investment account