On February 1, 2012, Jesse Co. purchased 20% of the outstanding shares of Avril Inc. at a cost of $275,000. During the next two fiscal years, Avril Inc. reported the following:
$\begin{array}{|l|r|r|}
\hline & \text { Net income } & \text { Dividends } \
\hline \text { January } 31,2013 & \$ 42,000 & \$ 20,000 \
\hline \text { January } 31,2014 & \$ 35,000 & \$ 15,000\\hline
\end{array}$ Required:
(a)If Jesse records its investment in Avril at cost, what would the balance in the investment account be at January 31, 2014? What would be reported on the statement of comprehensive income with respect to this investment for 2013 and 2014?
(b)If Jesse uses the equity method for reporting its investment in Avril, what would the balance in the investment account be at January 31, 2014? What would be reported on the statement of comprehensive income with respect to this investment?

Question

On February 1, 2012, Jesse Co. purchased 20% of the outstanding shares of Avril Inc. at a cost of $275,000. During the next two fiscal years, Avril Inc. reported the following:
 $\begin{array}{|l|r|r|} 
\hline & \text { Net income } & \text { Dividends } \
\hline \text { January } 31,2013 & \$ 42,000 & \$ 20,000 \
\hline \text { January } 31,2014 & \$ 35,000 & \$ 15,000\\hline 
\end{array}$ Required:
(a)If Jesse records its investment in Avril at cost, what would the balance in the investment account be at January 31, 2014? What would be reported on the statement of comprehensive income with respect to this investment for 2013 and 2014?
(b)If Jesse uses the equity method for reporting its investment in Avril, what would the balance in the investment account be at January 31, 2014? What would be reported on the statement of comprehensive income with respect to this investment?

Quizplus · Accepted Answer

The Answer of On February 1, 2012, Jesse Co. purchased 20% of the outstanding shares of Avril Inc. at a cost of $275,000. During the next two fiscal years, Avril Inc. reported the following:
 $\begin{array}{|l|r|r|} 
\hline & \text { Net income } & \text { Dividends } \
\hline \text { January } 31,2013 & \$ 42,000 & \$ 20,000 \
\hline \text { January } 31,2014 & \$ 35,000 & \$ 15,000\\hline 
\end{array}$ Required:
(a)If Jesse records its investment in Avril at cost, what would the balance in the investment account be at January 31, 2014? What would be reported on the statement of comprehensive income with respect to this investment for 2013 and 2014?
(b)If Jesse uses the equity method for reporting its investment in Avril, what would the balance in the investment account be at January 31, 2014? What would be reported on the statement of comprehensive income with respect to this investment?

On February 1, 2012, Jesse Co Required: (A)If Jesse Records Its Investment in Avril at Cost

On February 1, 2012, Jesse Co Required:
(A)If Jesse Records Its Investment in Avril at Cost