On January 1, 2017, Lund Corporation purchases a 30% interest in Aluma-Boat Company for $200,000. At the time of the purchase, Aluma-Boat has total stockholders’ equity of $400,000. Any excess of cost...

On January 1, 2017, Lund Corporation purchases a 30% interest in Aluma-Boat Company for $200,000. At the time of the purchase, Aluma-Boat has total stockholders’ equity of $400,000. Any excess of cost over the equity purchased is attributed in part to machinery worth $50,000 more than book value with a remaining useful life of five years. Any remaining excess would be allocated to goodwill. Aluma-Boat reports the following income and dividend distributions in 2017 and 2018: Lund sells its investment in Aluma-Boat Company on January 2, 2019, for $230,000. Record the sale of the investments assuming the use of the equity method. You may ignore income taxes. Carefully schedule the investment account balance at the time of the sale. View Solution:

On January 1 2017 Lund Corporation purchases a 30 interest