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