Response to the following :
Without making journal entries, record the transactions of problem directly in the Newbold account, Long-Term Equity-Method Investment in Italian Imports. Assume that after all the noted transactions took place. Newbold sold its entire investment in Italian Imports for cash of $2,500,000. How much is Newbold's gain or loss on the sale of the investment?
Problem:
Newbold, Inc., owns equity-method investments in several other departmentstore companies. Newbold paid $2 million to acquire a 20% investment in Italian Imports Company. Italian Imports reported net income of $780,000 for the first year and declared and paid cash dividends of $500,000.
Record the following in Newbold's journal:
(a) purchase of the investment,
(b) its proportion of Italian Imports' net income, and
(c) receipt of the cash dividends.