Melville Inc. purchased 2,000 common shares (20%) of Raymore Ltd. on January 1 , Year...
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Melville Inc. purchased 2,000 common shares (20%) of Raymore Ltd. on January 1 , Year 5 for $42,000. Additional information on Raymore for the two years ending December 31 , Year 6 , is as follows: At December 31 , Year 6, Raymore had some inventory that was purchased from Melville. Melville had recorded a gross profit of $1,300 on the sale of this inventory. This gross profit should be deducted from Melville's Year 6 profit and investment account under the equity method. On January 1, Year 7, Melville sold its investment in Raymore for $47,000. Required: (a) Calculate the balance in the investment account at December 31 , Year 6 under each of the cost and equity methods. (Omit \$ sign in your response.) (b) Calculate the investment income for Year 6 under each of the cost and equity methods. (Omit \$ sign in your response.) (c) Prepare the journal entries for the sale of the shares on January 1, Year 7 under each of the cost and equity methods. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
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