Question
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
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 $64,000, at which time Case Products reported retained earnings of $15,000 and capital stock outstanding of $29,000. The differential was attributable to patents with a life of eight years. Income and dividends of Case Products were: |
Year | Net Income | Dividends | ||||||
20X6 | $ | 19,000 | $ | 7,000 | ||||
20X7 | 27,000 | 9,000 | ||||||
20X8 | 35,000 | 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. |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started