Required:
Assume a 40% tax rate.
(a) Prepare X Co.'s equity method journal entries subsequent to the date of acquisition for each of Years 3 and 4. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Input all values as positive numbers.)

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X Co. acquired 75% of Y Co. on January 1, Year 3, when Y Co. had common shares of $200,000 and retained earnings of $80,000. The acquisition differential was allocated as follows on this date: Inventory Equipment (15-year life) Total acquisition differential $ 70,000 60,000 $130,000 Since this date the following events have occurred: Year 3 Y Co. reported a net income of $150,000 and paid dividends of $35,000. On July 3, X Co. sold land to Y Co. for $132,000. This land was carried in the records of X Co. at $85,000. On December 31, Year 3, the inventory of X Co. contained an intercompany profit of $40,000. X Co. reported a net income of $500,000 from its own operations. X Co. acquired 75% of Y Co. on January 1, Year 3, when Y Co. had common shares of $200,000 and retained earnings of $80,000. The acquisition differential was allocated as follows on this date: Inventory Equipment (15-year life) Total acquisition differential $ 70,000 60,000 $130,000 Since this date the following events have occurred: Year 3 Y Co. reported a net income of $150,000 and paid dividends of $35,000. On July 3, X Co. sold land to Y Co. for $132,000. This land was carried in the records of X Co. at $85,000. On December 31, Year 3, the inventory of X Co. contained an intercompany profit of $40,000. X Co. reported a net income of $500,000 from its own operations.