Revco Corporation purchases 40 percent of the voting stock of Ronco Pharmaceuticals on January 1,2013, for $5 million in cash. Ron-co's book value at the date of acquisition is $6 million. Investigation reveals that Ronco's reported patents (10-year life) are undervalued by $4 million and it has unreported technology (5-year life) valued at $1 million. Ronco pays dividends of $250,000 and reports net income of $900,000 for 2013. Any unallocated excess of Revco's cost over Ronco's book value is attributed to goodwill.
Required
Prepare the journal entries on Revco's books to report the above information assuming Revco accounts for its investment in Ronco using the equity method.