Chapter E, Problem E.41AP

(Learning Objectives 2, 3: Analyze and report equity and equity-method investments) The beginning balance sheet of Homesby Corporation included the following long-term asset:

Equity-method Investment in Jasmine Software.....................................................

$618,000

Homesby completed the following investment transactions during the year:

Mar 16	Purchased 2,700 shares Lowell, Inc. common stock (10% of Lowell’s stock) as a long-term equity investment, paying $12.50 per share.
May 21	Received a cash dividend of $2.25 per share on the Lowell investment.
Aug 17	Received a cash dividend of $83,000 from Jasmine Software.
Dec 31	Received annual reports from Jasmine Software; net income for the year was $550,000. Of this amount, Homesby’s share was 27%.

At year-end, the fair values of Homesby’s investments were as follows: Lowell, $39,000; Jasmine, $747,000.

Requirements

1. 1. Record the transactions in the journal of Homesby.
2. 2. Post entries to the T-account for Equity-method Investment in Jasmine Software, and determine its balance at December 31.
3. 3. Show how to report the Investment in Equity Securities and the Equity-method Investment in Jasmine Software accounts on Homesby’s balance sheet at December 31.