Best Corporation acquired 100 percent of the voting common stock of Flair Company on January 1, 20X7, by issuing bonds with a par value and fair value of $670,000 and making a cash payment of $24,000. At the date of acquisition, Flair reported assets of $740,000 and liabilities of $140,000. The book values and fair values of Flair’s net assets were equal except for land and copyrights. Flair’s land had a fair value $16,000 higher than its book value. All of the remaining purchase price was attributable to the increased value of Flair’s copyrights with a remaining useful life of eight years. Flair Company reported a loss of $88,000 in 20X7 and net income of $120,000 in 20X8. Flair paid dividends of $24,000 each year.
Assuming that Best Corporation uses the equity method in accounting for its investment in Flair Company, prepare all journal entries for Best for 20X7 and 20X8.