On January 1, 2022, ABC acquired 80% of XYZ voting shares for $200,000. As of that date,

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Question:

On January 1, 2022, ABC acquired 80% of XYZ voting shares for $200,000. As of that date, XYZ reported in its equity section of the balance sheet common shares outstanding of $75,000 and retained earnings of $150,000. The fair value of the non-controlling interest was $50,000 on the acquisition date. The excess paid by ABC related to XYZ equipment that had a fair value of $25,000 above book value and a remaining economic life of 8 years at the date of the business combination. At the end of 2022, ABC reported net income of $40,000 and paid dividends of $20,000. At the end of 2022, XYZ reported net income of $50,000 and paid dividends of $20,000.

Required: 1) Provide the journal entries recorded by ABC during 2020 on its books if you account for your investment in SXYZ using the equity method
2) Provide the consolidation entries necessary as of December 31, 2022 to prepare consolidated financial statements of ABC and subsidiaries