Pawn Corporation purchased 30 percent of Shop Company’s common stock on January 1, 20X5, by issuing preferred stock with a par value of $50,000 and a market price of $120,000. The following amounts relate to Shop’s balance sheet items at that date:

Shop purchased buildings and equipment on January 1, 20X0, with an expected economic life of 20 years. No change in overall expected economic life occurred as a result of the acquisition of Pawn’s stock. The amount paid in excess of the fair value of Shop’s reported net assets is attributed to unrecorded copyrights with a remaining useful life of eight years. During 20X5, Shop reported net income of $40,000 and paid dividends of $10,000.

Required

Give all journal entries to be recorded on Pawn Corporation’s books during 20X5, assuming it uses the equity method in accounting for its ownership of Shop Company.

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Cash & Receivables Buildings & Equipment Less: Accumulated Depreciation Total Assets Accounts Payable Bonds Payable Common Stock Retained Earnings Total Liabilities & Equities Book Value $200,000 400,000 (100,000) $500,000 $ 50,000 200,000 100,000 150,000 $500,000 Fair Value $200,000 360,000 50,000 200,000