On July 1, 2021, Clearwater Inc. purchased 9,250 shares of the outstanding common stock of Mountain Corporation at a cost of $192,500. Clearwater will have significant influence over the financial and operating policies of Mountain. Mountain had 37,000 shares of outstanding common stock. Assume the total book value and fair value of identifiable net assets is $720,000. Both companies have a January through December fiscal year. The following data pertains to Mountain Corporation during 2021:

Dividends declared and paid, January 1–June 30	$	12,700
Dividends declared and paid, July 1–December 31	$	12,700
Net income, January 1–June 30	$	14,700
Net income, July 1–December 31	$	18,700

Required:
1. Prepare the entry to record the original investment in Mountain.
2. Compute the goodwill (if any) on the acquisition.
3. Prepare the necessary entries (other than acquisition) for 2021 under the equity method.

Answer rating: 100% (QA)

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