Ravine Corporation purchased 30 percent ownership of Valley Industries for $90,000 on January 1, 20X6, when Valley had capital stock of $240,000 and retained earnings of $60,000. The following data were reported by the companies for the years 20X6 through 20X9:

Required
a. What net income would Ravine Corporation have reported for each of the years, assuming Ravine accounts for the intercorporate investment using
(1) The cost method and
(2) The equity method?
b. Give all appropriate journal entries for 20X8 that Ravine made under both the cost and the equitymethods.

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Dividends Declared Operating Income, Net Income, Year Ravine Corporation Valley Industries 20X6 20X7 20X8 20x9 Ravine $140,000 80,000 220,000 160,000 $30,000 50,000 10,000 40,000 Valley $20,000 40,000 40,000 20,000 $ 70,000 70,000 90,000 100,000