40. Pure Company acquired 80% of the outstanding common stock of Saxxon Company on January 2, 2024 for $675,000. At that time, Saxxons total stockholders equity amounted to $1,000,000. Saxxon Company reported net income and dividends for the last two years as follows:

2024 2025

Reported net income $45,000 $60,000

Dividends distributed 35,000 75,000

Required: Prepare journal entries for Pure Company for 2024 and 2025 assuming Pure uses:

A. The cost method to record its investment

B. The complete equity method to record its investment. The difference between implied value and the book value of equity acquired was attributed solely to a building, with a 20-year expected life.

Please explain how in part A 2025 entry in saxxon company (.8x$5000) =4000 cr.

I don't know where the 5000 came from and why wouldnt that entry be

cash 60,000

Investment in saxxon 60,000

isn't it a liquidating dividend?

and for part B where do you get the 75,000 for the difference between implied value and the book value

isn't it suppose to be [(1,000,000x.8)-675,000]/20 = 6,250

please explain im lost

these are my entries please explain where I went wrong

* $675,000/.8$750,000=$93,750 write-up of PPE; Parent's share =80%, or $75,000 complete Equity me thod IB= InvestmentInsong2024 cash Investment In song Equixy Income cash Investment In song Equity Income In vestment In song 2025 Investment In song Equity Income cash Investment In song Equity Income Investment in song * $675,000/.8$750,000=$93,750 write-up of PPE; Parent's share =80%, or $75,000 complete Equity me thod IB= InvestmentInsong2024 cash Investment In song Equixy Income cash Investment In song Equity Income In vestment In song 2025 Investment In song Equity Income cash Investment In song Equity Income Investment in song