Pawn Corporation purchased 30 percent of Shop Companys common stock on January 1, 20X5, by issuing preferred

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Pawn Corporation purchased 30 percent of Shop Company’s common stock on January 1, 20X5, by issuing preferred stock with a par value of $50,000 and a market price of $120,000. The following amounts relate to Shop’s balance sheet items at that date:


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Shop purchased buildings and equipment on January 1, 20X0, with an expected economic life of 20 years. No change in overall expected economic life occurred as a result of the acquisition of Pawn’s stock. The amount paid in excess of the fair value of Shop’s reported net assets is attributed to unrecorded copyrights with a remaining useful life of eight years. During 20X5, Shop reported net income of $40,000 and paid dividends of $10,000.



Required


Give all journal entries to be recorded on Pawn Corporation’s books during 20X5, assuming it uses the equity method in accounting for its ownership of Shop Company.

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Advanced Financial Accounting

ISBN: 9781260772135

13th Edition

Authors: Theodore Christensen, David Cottrell, Cassy Budd

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