Question $2$

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Equity method journal entries $($price greater than book value$)$

An investor company purchases a $20\%$ interest in an investee company, and the investor concludes that it can exert significant inf luence over the Investee. The book value of the investee's Stockholders' Equity on the acquisition date is $$500,000$ and the investor purchases its $20\%$ interes: for $$130,000$ The investor is willing to pay the purchase price because the investee owns an unrecorded $($internally developed$)$ patent with a fair value equal to $$130,000$ The patent has a remaining useful life of $10$ years. Subsequent to the acquisition, the investee reports net income of $$120,000$ and pays a cash dividend to the investor of $$10,000$ At the end of the first year, the investor sells the Equity Investment for $$160,000$ Prepare all of the required journal entries to account for this Equity Investment during the year.

$\backslash$table$[[,$Debit,$],[,0,$Credit$],[,0,0],[($to record the purchase of the Equity investment$),,],[,0,0],[(10$ record equity income$),0,0],[,0,0],[($to record receint of the cash dividend$),0,0],[,0,0],[,0,0],[(10$ record the amortization of the patent asset$),,],[,0,0],[,0,0],[($to record the sale of the Equity investment$),0,0]]$