Question

Corporation owns​ equity-method investments in several companies.

WatsonWatson

paid

$1,300,000

to acquire a

30​%

investment in

SlaterSlater

Software Company.

SlaterSlater

reported net income of

$680,000

for the first year and declared and paid cash dividends of

$450,000.

Without making journal​ entries, record the investment transactions directly in the

WatsonWatson

​T-account, Equity-method Investment. Assume that after all the noted transactions took​ place,

WatsonWatson

sold its entire investment in

SlaterSlater

for cash of

$2,900,000.

How much is

WatsonWatson​'s

gain or loss on the sale of the​ investment?

Post the investment transactions and determine the balance in

WatsonWatson​'s

​T-account for​ Equity-method Investment.

Equity-method Investment

Assume that after all the noted transactions took​ place,

WatsonWatson

sold its entire investment in

SlaterSlater

for cash of

$2,900,000.

How much is

WatsonWatson​'s

gain or loss on the sale of the​ investment?

If Watson sold its entire investment in Slater for cash of $2,900,000, it would record a

of $

.

Answer 1

Equity-method Investment
Cost	1300000	135000	Dividends
Share in net income	204000
Balance	1369000

Share in net income = 30% x $680000 = $204000

Dividend received = 30% x $450000 = $135000

Kindly fill appropriately in the T-account as required. For any clarifications write under the comments section.

Gain or (loss) on the sale of investment = $2900000 - $1369000 = $1531000.

If Watson sold its entire investment in Slater for cash of $2,900,000, it would record a gain of $1531000.