At the beginning of 2019, Presidio Company purchased 95% of the common stock of Succo Company for $494,000. On that date, Succo Company’s stockholders’ equity consisted of the following:

During 2027, Succo Company reported net income of $40,000 and distributed dividends in the amount of $19,000. Succo Company’s retained earnings balance at the end of 2026 amounted to $160,000. Presidio Company uses the equity method.

Required:
Prepare in general journal form the workpaper entries necessary in the compilation of consolidated financial statements on December 31, 2027. Explain why the partial and complete equity methods would result in the same entries in this instance.

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Common stock Other contributed capital Retained earnings Total $300,000 100,000 120,000 $520,000