Question

The summarized balance sheets of Sandhill Company and Whispering Company as of December 31, 2021 are as follows: Sandhill Company Balance Sheet December 31, 2021 Assets $2200000 Liabilities $260000 Capital stock 1100000 Retained earnings 840000 Total equities $2200000 Whispering Company Balance Sheet December 31, 2021 Assets $1640000 Liabilities $370000 Capital stock 1070000 Retained earnings 200000 Total equities $1640000 If Sandhill Company acquired a 20% interest in Whispering Company on December 31, 2021 for $310000 and the fair value method of accounting for the investment were used, the amount of the debit to Equity Investments (Whispering) would have been

Answer 1

$310,000

Step-by-step explanation:

Since in the given case it is mentioned that the 20% interest is acquired and the fair value accounting method is used for the investment i.e $310,000 is actually paid

So in this case the book value is not relevant. hence we ignored it

And, the amount of the debit to Equity Investments is equal to the fair value amount i.e $310,000 and the same is to be recognized in the books of accounts