Question: Equity Method Investment with Basis Differences Several Years Later Saxton Corporation purchased 30 percent of Taylor Company's voting stock on January 1, 2016, for $4

Equity Method Investment with Basis Differences Several Years Later Saxton Corporation purchased 30 percent of Taylor Company's voting stock on January 1, 2016, for $4 million in cash. At the date of acquisition, Taylor reported its total assets at $80 million and its total liabilities at $74 million. Investigation revealed that Taylor's plant and equipment (10-year life) was overvalued by $2 million and it had an unreported customer database (3-year life) valued at $700,000. Taylor declares and pays $150,000 in dividends and reports net income of $325,000 in 2019. Required Prepare the necessary journal entries on Saxton's books to report the above information for 2019 assuming Saxton uses the equity method to report its investment. Cash General Journal Description Debit Credit 45,000 0 0 45,000 Investment in Taylor To record receipts of dividends. Investment in Taylor Equity in net income of Taylor To record earnings of the investee. 37,500 x 0 0 97,500 x

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