Amber Corporation reported the following summarized balance sheet data on December 31, 20X6:

On January 1, 20X7, Purple Company acquired 100 percent of Amber’s stock for $500,000. At the acquisition date, the book values and fair values of Amber’s assets and liabilities were equal. Amber reported net income of $50,000 for 20X7 and paid dividends of $20,000.

Required

a. Give the journal entries recorded by Purple on its books during 20X7 if it accounts for its investment in Amber using the equity method.

b. Give the elimination entries needed on December 31, 20X7, to prepare consolidated financial statements.

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Liabilities Common Stock Retained Earnings Total $100,000 300,000 200,000 $600,000 Assets $600,000 Total $600,000