What are the journal entries involved with the equity method?
For example, let's assume the investor paid $300 on 1/1/x1 to acquire 30% of the stock of the investee, at a time when the investee's net assets equaled 1,000 so that the original investment equaled the investor's 30% share of equity. In 20x1 the investee reported income of $400 and paid dividends totaling $100 to stockholders of record on 12/31/x1 with a payment date of 1/7/x2.
- The entries are as follows:
- Investment 300(1,000x.30)
- Cash 300
- 12/31/x1(share of income)
- Investment 120(400x.30)
- Equity in Investee 120
- 12/31/x1(to record the dividend)
- Dividends Recievable 30(100x.30)
- Investment 30
if any any depreciation of fmv assets then they would be depreciated over there lives. Also amortization and goodwill impairment go in this same entry.
- Equity in Investee Income x
- Investment x