1. During review of the adjusting entries to be recorded on December 31, 20X8, Grand Corporation discovered that it had inappropriately been using the cost method in accounting for its investment in Case Products Corporation. Grand purchased 100 percent ownership of Case Products on January 1, 20X6, for $60,000, at which time Case Products reported retained earnings of $15,000 and capital stock outstanding of $28,000. The differential was attributable to patents with a life of eight years. Income and dividends of Case Products were:

Year	Net Income				Dividends
20X6		$	24,000			$	7,000
20X7			32,000				9,000
20X8			40,000				9,000

Required:

Prepare the correcting entry required on December 31, 20X8, to properly report the investment under the equity method, assuming the books have not been closed. Case Products' dividends were declared in early November and paid in early December each year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2. Consolidated financial statements tend to be most useful for:

A. Creditors of a consolidated subsidiary.

B. Investors and long-term creditors of the parent company.

C. Short-term creditors of the parent company.

D. Stockholders of a consolidated subsidiary.

3. Blue Company owns 80 percent of the common stock of White Corporation. During the year, Blue reported sales of $1,000,000, and White reported sales of $500,000, including sales to Blue of $80,000. The amount of sales that should be reported in the consolidated income statement for the year is:

A. $500,000.

B. $1,300,000.

C. $1,420,000.

D. $1,500,000.