On January 3, 2018, Jenkins Corp. acquired 40% of the outstanding common stock of Bolivar Co. for $1,200,000. This acquisition gave Jenkins the ability to exercise significant influence over the investee. The book value of the acquired shares was $950,000. Any excess cost over the underlying book value was assigned to a patent that was undervalued on Bolivar's balance sheet. This patent has a remaining useful life of ten years. For the year ended December 31, 2018, Bolivar reported net income of $312,000 and paid cash dividends of $96,000.Required:Prepare a schedule to show the balance Jenkins should report as its Investment in Bolivar Co. at December 31, 2018.
What will be an ideal response?
| Investment in Bolivar Co.: | |||
| Acquisition price | $ | 1,200,000 | |
| Equity income ($312,000 × 40%) | 124,800 | ||
| Dividends ($96,000 × 40%) | (38,400 | ) | |
| Excess patent amortization ($1,200,000 - $950,000 ÷ 10) | (25,000 | ) | |
| Balance at December 31, 2018 | $ | 1,261,400 | |
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