Melville Inc. purchased 2,000 common shares (20%) of Raymore Ltd. on January 1, Year 5 for $42,000. Additional information on Raymore for the two years ending December 31, Year 6, is as follows: Year Net Income Dividends Paid Market Value per Share at end of period Year 5 $ 25,000 $ 13,000 $22.00 Year 6 28,000 14,000 22.60 At December 31, Year 6, Raymore had some inventory that was purchased from Melville. Melville had recorded a gross profit of $1,300 on the sale of this inventory. This gross profit should be deducted from Melville's Year 6 profit and investment account under the equity method. On January 1, Year 7, Melville sold its investment in Raymore for $47,000. Required: (a) Calculate the balance in the investment account at December 31, Year 6 under each of the cost and equity methods. (Omit $ sign in your response.) Investment account at end of Year 6 under cost method $ Investment account at end of Year 6 under equity method $ (b) Calculate the investment income for Year 6 under each of the cost and equity methods. (Omit $ sign in your response.) Investment income for Year 6 under cost method $ Investment income for Year 6 under equity method $ (c) Prepare the journal entries for the sale of the shares on January 1, Year 7 under each of the cost and equity methods. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
Melville Inc. purchased 2,000 common shares (20%) of Raymore Ltd. on January 1, Year 5 for $42,000. Additional information on Raymore for the two years ending December 31, Year 6, is as follows:
| Year | Net Income | Dividends Paid | Market Value per Share at end of period |
|||
| Year 5 | $ | 25,000 | $ | 13,000 | $22.00 | |
| Year 6 | 28,000 | 14,000 | 22.60 | |||
At December 31, Year 6, Raymore had some inventory that was purchased from Melville. Melville had recorded a gross profit of $1,300 on the sale of this inventory. This gross profit should be deducted from Melville's Year 6 profit and investment account under the equity method. On January 1, Year 7, Melville sold its investment in Raymore for $47,000.
Required:
(a) Calculate the balance in the investment account at December 31, Year 6 under each of the cost and equity methods. (Omit $ sign in your response.)
| Investment account at end of Year 6 under cost method | $ |
| Investment account at end of Year 6 under equity method | $ |
(b) Calculate the investment income for Year 6 under each of the cost and equity methods. (Omit $ sign in your response.)
| Investment income for Year 6 under cost method | $ |
| Investment income for Year 6 under equity method | $ |
(c) Prepare the journal entries for the sale of the shares on January 1, Year 7 under each of the cost and equity methods. (If no entry is required for a transaction/event, select "No
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