Question

On January 1, 2017, Fisher Corporation purchased 40 percent (80,000 shares) of the common stock of Bowden, Inc. for $976,000 in cash and began to use the equity method for the investment. The price paid represented a $60,000 payment in excess of the book value of Fisher's share of Bowden's underlying net assets. Fisher was willing to make this extra payment because of a recently developed patent held by Bowden with a 15-year remaining life. All other assets were considered appropriately valued on Bowden's books. Bowden declares and pays a $92,000 cash dividend to its stockholders each year on September 15. Bowden reported net income of $402,000 in 2017 and $346,000 in 2018. Each income figure was earned evenly throughout its respective year. On July 1, 2018, Fisher sold 10 percent (20,000 shares) of Bowden's outstanding shares for $332,000 in cash. Although it sold this interest, Fisher maintained the ability to significantly influence Bowden's decision-making process. Prepare the journal entries for Fisher for the years of 2017 and 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to the nearest whole dollar.)

1. Record cost of 80,000 shares of Bowden Company.

2. Record the annual dividend declared and received from Bowden.

3. Record accrue 2017 income based on 40% ownership of Bowden.

4. Record amortization of $60,000 excess patent fair value [indicated in problem] over 15 years.

5. Record the entry to accrue ½ year income of 40% ownership.

6. Record ½ year amortization of patent to establish correct book value for investment as of 7/1/18.

7. Record 20,000 shares of Bowden Company sold; investment basis computed below.

8. Record annual dividend declared and received.

9. Record ½ year income based on remaining 30% ownership.

10. Record ½ year of patent amortization.

Answer 1

Date	Particulars	Debit ($)	Credit ($)
1	Investment in shares	916000
	Patent	60000
	Bank		976000
	(being the shares acquired)
2	Bank	36800
	Dividend		36800
	(Being dividend received)
	Dividend	36800
	Profit and loss account		36800
	(Being dividend credited in profit and loss account)
3	Income of Bowden	160800
	Profit and loss account		160800
	(being share of profit from Bowden is recorded)
4	Amortization expenses	4000
	Patent		4000
	(Being amortization recorded)
	Profit and loss account	4000
	Amortization expenses		4000
	(Being amortization recorded)
5	Income of Bowden	138400
	Profit and loss account		138400
	(being share of profit from Bowden is recorded)
6	Amortization expenses	2000
	Patent		2000
	(Being amortization recorded)
	Profit and loss account	2000
	Amortization expenses		2000
	(Being amortization recorded)
7	Bank	332000
	Investment in shares		114500
	Profit and loss account		217500
	(Being the profit on sale of investment is recognized)
8	Bank	27600
	Dividend		27600
	(Being dividend received)
	Dividend	27600
	Profit and loss account		27600
	(Being dividend credited in profit and loss account)
9	Income of Bowden	103800
	Profit and loss account		103800
	(being share of profit from Bowden is recorded)
10	Amortization expenses	2000
	Patent		2000
	(Being amortization recorded)
	Profit and loss account	2000
	Amortization expenses		2000
	(Being amortization recorded)-