Lesson: Accounting for Investments - Equity Method Example

In this lesson, Nick Palazzolo, CPA, breaks down the principles of accounting for equity method investments by walking through a comprehensive example involving a parent company's acquisition of a subsidiary. Dive into the nitty-gritty of journal entries that reflect initial investments, the investor’s share of earnings, and dividends. Nick demonstrates how to adjust for fair value differences, calculate goodwill, and understand depreciation on undervalued equipment. Grab a front-row seat as he meticulously explains how to prepare journal entries for these events, compute goodwill, and arrive at an accurate valuation for the investment – critical skills for mastering this area of accounting.