On January 1, 2017, Fisher Corporation purchased 40 percent(72,000 shares) of the common stock of Bowden, Inc. for $984,000 incash and began to use the equity method for the investment. Theprice paid represented a $54,000 payment in excess of the bookvalue of Fisher's share of Bowden's underlying net assets. Fisherwas willing to make this extra payment because of a recentlydeveloped patent held by Bowden with a 15-year remaining life. Allother assets were considered appropriately valued on Bowden'sbooks.
Bowden declares and pays a $98,000 cash dividend to itsstockholders each year on September 15. Bowden reported net incomeof $410,000 in 2017 and $360,000 in 2018. Each income figure wasearned evenly throughout its respective year.
On July 1, 2018, Fisher sold 10 percent (18,000 shares) ofBowden's outstanding shares for $326,000 in cash. Although it soldthis interest, Fisher maintained the ability to significantlyinfluence Bowden's decision-making process.
Prepare the journal entries for Fisher for the years of 2017 and2018.
record 1/2 year of patentamortization:
