The Paris Company purchased an 80% interest in Seine, Inc. for $600,000 on January 1, 20X1, when Seine had the following balance sheet:

The inventory has a total fair value of $140,000 (is $20,000 greater than book value) and is sold during 20X1. The building has a total fair value of $320,000 and a 10-year remaining life. The equipment has a total fair value of $120,000 and a remaining life of 5 years. Any remaining excess is attributed to goodwill.

From January 1 through December 31, 20X1, Seine had a reported net income of $100,000 and paid $10,000 in dividends.

Required:

Prepare the entries on the books of Paris for the year ended December 31, 20X1 using the simple equity method.

Prepare the entries on the books of Paris for the year ended December 31, 20X1 using the sophisticated equity method.

Assets Accounts receivable Inventory Land Building Equipment Total Liabilities and Equity Current liabilities Common stock, $5 par Paid-in capital in excess of par Retained earnings Total 50,000 120,000 80,000 270,000 80,000 $600,000 $100,000 50,000 150,000 300,000 $600,000