On January 1, 2016, Ashland Company purchases a 25% interest in Cramer Company for $195,000. Ashland Company prepares the following determination and distribution of excess schedule:

The following additional information is available:
a. Cramer Company sells a machine to Ashland Company for $30,000 on July 1, 2017. At this date, the machine has a book value of $25,000 and an estimated future life of five years. Straight-line depreciation (to the nearest month) is being used. For income tax purposes, the gain on the sale is taxable in the year of the sale.
b. The following applies to Ashland Company sales to Cramer Company for 2017 and 2018:

c. Internally generated income (before tax) for the two companies is as follows:

d. Cramer pays dividends of $5,000, $10,000, and $10,000 in 2016, 2017, and 2018, respectively.
e. The corporate income tax rate of 30% applies to both companies. Assume an 80% dividend exclusion.
Required
Prepare all equity method adjustments for Ashland Company’s investment in Cramer Company on December 31, 2016, 2017, and 2018. Consider income tax implications. Supporting calculations and schedules should be in good form.

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$195,000 Price paid for investment . . .. . _ . Less book value of interest acquired: . . . _ . . . . . . _ . .. . . Common stock ($5 par.... Paid-in capital in excess f $100,000 200,000 150,000 $450,000 Retained earnings Total stockholders' equity. Excess of cost over book value (debit).. . . 82,500 7,500 Dr 75,000 Dr 2017 2018 $ 4,000 $10,000 $15,000 $4,000 5,000 Intercompany merchandise in ending inventory 40% 40% 2016 2017 2018 Cramer Company 60,000 80,0 00,000