Answer:
investment on Gator Co 180,300 debit
cash 180,300 credit
--- to recrod purchase ---
cash 6,834 debit
Investment on Gator Co 6,834 credit
--- dividends paid ---
loss on investment 18,598 debit
Investment on Gator Co 18,598 credit
--- loss on investment ---
Balance at Dec 31th
Investment on Gator Co: 154,868
On equity method we reflect on the investment change in equity, as the cash dividends decrease the equity on Gaitor we decrease our investment valuation
When the company recognize income or losses we also adjust for the value of the equity
This is a substancial differnece with fair value on which we simply adjust by the market value of the stocks and the cas dividends are considered gains regardless of the income/loss of the period.
Step-by-step explanation:
dividends: 20,100 x 34% = 6,834
income: 54,700 x 34% = 18,598
balance
180,300 - 6,834 - 18,598 = 154,868