Textbook Problem

Recording Investments under the Equity Method Harper Corporation acquired 80,000 of the 200,000 outstanding shares of Moore Corporation on April 1, 2019, for $400,000 and obtained significant influence. The following information concerning Moore is available on the date of acquisition:

Subsequently, Moore paid a cash dividend of $40,000 on August 31, 2019, and reported net income of $155,000 on December 31, 2019.

Required:

1. 1. Prepare journal entries for Harper to record the preceding information.
2. 2. What is the balance in Harper’s investment account on December 31, 2019? Show all computations.
3. 3. Prepare Harper’s net cash flow from operating activities section of its 2019 statement of cash flows under the indirect method, assuming Harper reported $200,000 of net income. Ignore income taxes.