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Equity Method Investment with Cost In Excess of Book Value Revco Corporation purchases 35 percent of the voting stock of Ronco Pharmaceuticals on January 1, 2022, for $15 million in cash. Ronco's book value at the cate of acquisition is $10 million. Investigation reveals that Ronco's reported patents (10-year life) are undervalued by $2 million and it has unreported technology (5-year life) valued at $4 million. Ronco 10 fax 2232 pays cividends of $300,000 and reports net income of $1,500,000 1 2022. Required Prepare the journal entries on Revco's books to report the above information assuming Revco accounts for its Investment in Ronco using the equity method. Date Debit 15,000,000 ✓ 01/01/22 Investment in Ronco Cash 12:31:22 Cish Description ev ✔ v Investment in anca To record dividends reported by Ronco Investment in Ronco 0 140,000 * ✔ 140,00 ✔ Credit D 15.004OD 0 2541000 X D 250,000 Equity in net Income In record net income reported by Ronco At what amount does Revco report the investment in Ronco on its December 31, 2022, balance sheet? $ 25,475,000 *

Equity Method Investment with Cost In Excess of Book Value Revco Corporation purchases 35 percent of the voting stock of Ronco Pharmaceuticals on January 1, 2022, for $15 million in cash. Ronco's book value at the cate of acquisition is $10 million. Investigation reveals that Ronco's reported patents (10-year life) are undervalued by $2 million and it has unreported technology (5-year life) valued at $4 million. Ronco 10 fax 2232 pays cividends of $300,000 and reports net income of $1,500,000 1 2022. Required Prepare the journal entries on Revco's books to report the above information assuming Revco accounts for its Investment in Ronco using the equity method. Date Debit 15,000,000 ✓ 01/01/22 Investment in Ronco Cash 12:31:22 Cish Description ev ✔ v Investment in anca To record dividends reported by Ronco Investment in Ronco 0 140,000 * ✔ 140,00 ✔ Credit D 15.004OD 0 2541000 X D 250,000 Equity in net Income In record net income reported by Ronco At what amount does Revco report the investment in Ronco on its December 31, 2022, balance sheet? $ 25,475,000 *

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Equity Method Investment with Cost in Excess of Book Value Revco Corporation purchases 35 percent of the voting stock of Ronco Pharmaceuticals on January 1, 2022, for $15 million in cash. Ronco's book value at the cate of acquisition is $10 million. Investigation reveals that Ronco's reported patents (10-year life) are undervalued by $2 million and it has unreported technology (5-year life) valued at $4 million. Ronco pays dividends of $300,000 and reports net income of $1,500,000 for 2022. Required Prepare the journal entries on Revco's books to report the above information assuming Revco accounts for its Investment in Ronco using the equity method. Date Debit 01/01/22 Investment in Ronco 15,000,000 12/31/22 Cash Description Investment in Ranca To record dividends reported by Ronco Investment in Ronco 0 140,000 * ✔140,000 ✓ Credit D✔ 15.000,DOD D 2541000 X Equity in net Income In record net income reported by Ronco At what amount does Revco report the investment in Ronco on its December 31, 2022, balance sheet? $ 25,475,000 x 250,000
Transcribed Image Text:Equity Method Investment with Cost in Excess of Book Value Revco Corporation purchases 35 percent of the voting stock of Ronco Pharmaceuticals on January 1, 2022, for $15 million in cash. Ronco's book value at the cate of acquisition is $10 million. Investigation reveals that Ronco's reported patents (10-year life) are undervalued by $2 million and it has unreported technology (5-year life) valued at $4 million. Ronco pays dividends of $300,000 and reports net income of $1,500,000 for 2022. Required Prepare the journal entries on Revco's books to report the above information assuming Revco accounts for its Investment in Ronco using the equity method. Date Debit 01/01/22 Investment in Ronco 15,000,000 12/31/22 Cash Description Investment in Ranca To record dividends reported by Ronco Investment in Ronco 0 140,000 * ✔140,000 ✓ Credit D✔ 15.000,DOD D 2541000 X Equity in net Income In record net income reported by Ronco At what amount does Revco report the investment in Ronco on its December 31, 2022, balance sheet? $ 25,475,000 x 250,000
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