Application of Equity Method On January 1, 2019, Doe Company purchased 3,000 of the 10,000 common shares outstanding of Ray (Company for $15 per share and obtained significant influence. Doe amortizes its patents over 10 years. Ray’s December 31, 2018, condensed balance sheet is shown here:
Doe was unable to determine the fair value of Ray’s identifiable net assets shown on the preceding balance sheet. It did, however, determine that Ray uses the straight-line method (no residual value) to depreciate its fixed assets and to amortize its patents over 20 years and 10 years, respectively. At the end of 2019, Ray disclosed the following condensed income statement and retained earnings statement for 2019:
Required:
Prepare all the 2019 journal entries that Doc should make related to this investment. Show and label all supporting calculations.
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