(Change from Fair Value to Equity Method) On January 3, 2011, Martin Company p urchased for $500,000 cash a 10% interest in Renner Corp. On that date, the net assets of Renner had a book value of $3,700,000. The excess of cost over the underlying equity in net assets is attributable to undervalued depreciable assets having a remaining life of 10 years from the date of Martin’s purchase. The fair value of Martin’s investment in Renner securities is as follows: December 31, 2011, $560,000, and December 31, 2012, $515,000. On January 2, 2013, Martin purchased an additional 30% of Renner’s stock for $1,545,000 cash when the book value of Renner’s net assets was $4,150,000. The excess was attributable to depreciable assets having a remaining life of 8 years. During 2011, 2012, and 2013, the following occurred.
|
Renner Net Income |
Dividends Paid by Renner to Martin |
|
|
2011 |
$350,000 |
$15,000 |
|
2012 |
450,000 |
20,000 |
|
2013 |
550,000 |
70,000 |
Instructions
On the books of Martin Company, prepare all journal entries in 2011, 2012, and 2013 that relate to its investment in Renner Corp., reflecting the data above and a change from the fair value method to the equity method.