On January 1, Year 1, Rickson Corporation purchased 7,500 shares of AutoTech as an equity method investment for a total of $235,000. The 7,500 shares represent 30% of the outstanding (25,000) shares of AutoTech. Prepare the journal entries for Rickson to record the following transactions and events:Dec. 31, Year 1:AutoTech reported net income of $66,000 for Year 2.Feb. 1, Year 2:Sold 1,875 of the AutoTech shares for $33 per share. ??Nov. 1, Year 2:Rickson received a $0.90 per share cash dividend from AutoTech.Dec. 31, Year 2:AutoTech reported net loss of $46,000 for Year 2.
What will be an ideal response?
| 12/31/Year 1 | Equity Method Investments | 19,800 | ? |
| ? | Earnings from Equity Method Investment | ? | 19,800 |
| ? | ($66,000 * 30% = $19,800) | ? | ? |
| ? | ? | ? | ? |
| 2/1/Year 2 | Cash (1,875 * $33) | 61,875 | ? |
| ? | Loss on Sale of Equity Method Investment | 1,825 | ? |
| ? | Equity Method Investments | ? | 63,700 |
| ? | Carrying value of stock: ($235,000 + $19,800) * 1,875/7,500 = $63,700 | ? | ? |
| ? | Loss on sale = $63,700 - $61,875 = $1,825 | ? | ? |
| ? | ? | ? | ? |
| 11/1/Year 2 | Cash | 5,062.50 | ? |
| ? | Equity Method Investment | ? | 5,062.50 |
| ? | (7,500 - 1,875) * $0.90 | ? | ? |
| ? | ? | ? | ? |
| 12/31/Year 2 | Loss from Equity Method Investment | 10,350 | ? |
| ? | Equity Method Investment | ? | 10,350 |
| ? | $46,000 * [(7,500 - 1,875)/25,000] | ? | ? |
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