JLB Enterprises acquired 15% of REB Corporation on January 1, 2018, for $63,000 when the book value of REB's net assets was $360,000. During 2018, REB reported net income of $90,000 and paid dividends of $30,000. On January 1, 2019, JLB purchased an additional 25% of REB for $120,000. Any excess of cost over book value was attributable to goodwill (No amortization) On that same date, JLB changed to the equity method. During 2019, REB reported net income of $120,000 and paid dividends of $45,000. a. What investment income did JLB record from REB in 2018? b. What investment income did JLB record from REB in 2019? c. What journal entry was made on Jan 1 2019 as switch equity method? d. What was the balance in Equity Investment at December 31, 2019? (Hint: use the amount paid for 25% of REB from JLB to calculate the implied fair value of the original 15% of the investment)

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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JLB Enterprises acquired 15% of REB Corporation on January 1, 2018, for $63,000 when the
book value of REB's net assets was $360,000. During 2018, REB reported net income of $90,000
and paid dividends of $30,000. On January 1, 2019, JLB
for $120,000.
purchased an additional 25% of REB
Any excess of cost over book value was attributable to goodwill (No amortization).
On that same date, JLB changed to the equity method. During 2019, REB reported net income
of $120,000 and paid dividends of $45,000.
a. What investment income did JLB record from REB in 2018?
b.
What investment income did JLB record from REB in 2019?
C. What journal entry was made on Jan 1 2019 as switch equity method?
d. What was the balance in Equity Investment at December 31, 2019? (Hint: use the
amount paid for 25% of REB from JLB to calculate the implied fair value of the original
15% of the investment)
Transcribed Image Text:JLB Enterprises acquired 15% of REB Corporation on January 1, 2018, for $63,000 when the book value of REB's net assets was $360,000. During 2018, REB reported net income of $90,000 and paid dividends of $30,000. On January 1, 2019, JLB for $120,000. purchased an additional 25% of REB Any excess of cost over book value was attributable to goodwill (No amortization). On that same date, JLB changed to the equity method. During 2019, REB reported net income of $120,000 and paid dividends of $45,000. a. What investment income did JLB record from REB in 2018? b. What investment income did JLB record from REB in 2019? C. What journal entry was made on Jan 1 2019 as switch equity method? d. What was the balance in Equity Investment at December 31, 2019? (Hint: use the amount paid for 25% of REB from JLB to calculate the implied fair value of the original 15% of the investment)
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