Pancake Corporation saw the potential for vertical integration and purchased a 15% interest in Syrup Corp. on

Question:

Pancake saw the potential for vertical integration and purchased a 15% interest in Syrup Corp. on January 1, 2013, for $150,000. At that date, Syrup's stockholders' equity included $200,000 of $10 common stock, $300,000 of additional paid in capital, and $500,000 retained earnings. The companies began to work together and realized improved sales by both parties. On December 31, 2014, Pancake paid $250,000 for an additional 20% interest in Syrup Corp. Both of Pancake's investments were made when Syrup's book values equaled their fair values. Syrup's net income and dividends for 2013 and 2014 were as follows:

2013 2014 Net income Dividends S330,000 $220,000 $20,000 S30,000

Part 1: Prepare journal entries for Pancake Corporation to account for its investment in Syrup Corporation for 2013 and 2014.
Part 2: Calculate the balance of Pancake's investment in Syrup at December 31, 2014

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