Answer:
See answer an explanation below.
Explanation:
The journal entries will look as follows:
<u>General Journal </u>
<u>Description Debit ($) Credit ($) </u>
Equity investment 145,000
Cash 145,000
<em><u>(To record purchase of investment.) </u></em>
Cash 25,000
Income from equity investment (w.1) 25,000
<em><u>(To record equity income.) </u></em>
Cash 20,000
Equity investment 20,000
<u><em>(To record receipt of cash dividend.) </em></u>
Income from equity investment 2,000
Equity investment (w.2) 2,000
<em><u>(To record patent amortization expense.) </u></em>
Cash 180,000
Gain on sale of equity invest. (w.4) 32,000
Equity investment (w.3) 148,000
<u><em>(To record sale of investment.) </em></u>
Workings
w.1: Income from equity investment = Investee's net income * Percentage of interest = $100,000 * 25% = $25,000
w.2: Equity investment = (Patent value / Remaining useful life) * Percentage of interest = ($80,000 / 10) * 25% = $8,000 * 25% = $2,000
w.3: Equity investment = $145,000 + $25,000 - $20,000 - $2,000 = $148,000
w.4: Gain on sale of equity investment = Sales proceed - w.3 = $180,000 - $148,000 = $32,000
