On August 31, 2019, Brown Corporation purchased 90% shares of Owen Companys common stock for $6,500,000 cash.
Question:
On August 31, 2019, Brown Corporation purchased 90% shares of Owen Company’s common stock for $6,500,000 cash. On January 1, 2019, Owen Company had common stock of $4,500,000 and retained earnings of $1,800,000. The balance sheet information available for Owen Company on August 31, 2019, showed the following:
Book Value Fair Value
Inventory (FIFO) $1,300,000 $1,500,000
Equipment (net) 1,900,000 1,500,000
Land 3,000,000 3,000,000
The equipment had a remaining useful life of ten years. Owen Company reported $240,000 of net income in 2019 and declared $60,000 on December 1 of the year.
Required:
Prepare the workpaper entries on December 31, 2019 assuming the full equity method is used.
Expert Answer:
