Question

Capital Corporation purchased 100 percent of Cook Company's stock on January 1, 20X4, for $340,000. On that date, Cook reported net assets with a historical cost of $300,000 and a fair value of $340,000. The difference was due to the increased value of buildings with a remaining life of 10 years. During 20X4 and 20X5 Cook reported net income of $10,000 and $20,000 and paid dividends of $6,000 and $9,000, respectively.

Required
Assuming that Capital Corporation uses
(a) The equity method and
(b) The cost method in accounting for its ownership of Cook Company, give the journal entries that Capital recorded in 20X4 and 20X5.



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  • CreatedMay 23, 2014
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