Prime Company acquired \(90 \%\) of the outstanding voting common stock of Orr Company on January 1, 1999, for \(\$ 7,560,000\) cash. Prime Company uses the equity method. During 1999, Orr reported \(\$ 1,512,000\) of net income and paid \(\$ 504,000\) in cash dividends. The stockholders' equity section of the December 31, 1998, balance sheet for Orr follows:

a. Prepare general journal entries to record the investment and the effect of Orr's earnings and dividends on Prime Company's accounts.

b. Prepare the elimination entry that would be made on the work sheet for a consolidated balance sheet as of the date of acquisition.

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Stockholders' equity: Paid-in capital: Common stock-$21.00 par Retained earnings Total stockholders' equity. $6,720,000 1,680,000 $8,400,000