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January 1, Year 4, Goodkey Co. acquired all of the common shares of Jingya. The condensed income statements for the two ompanies for January, Year
January 1, Year 4, Goodkey Co. acquired all of the common shares of Jingya. The condensed income statements for the two ompanies for January, Year 5, were as follows: The following transactions occurred in January, Year 5, and are properly reflected in the income statements above: - On January 1, Year 5, Jingya sold equipment to Goodkey for $1,000,000 and reported a gain of $240,000. On this date, the equipment had a remaining useful life of four years. - On January 31, Year 5, Jingya paid a dividend of $600,000. Goodkey uses the cost method to account for its investment in Jingya. Both companies pay income tax at the rate of 40%. Required (a) Prepare a consolidated income statement for January, Year 5. (b) Now assume that Goodkey uses the equity method to account for its investment in Jingya. What accounts would change on the thi income statements (Goodkey, Jingya, and consolidated) in January, Year 5, and what would be the account balances? (c) Now assume that Goodkey only owns 80% of the common shares of Jingya and uses the cost method to account for its investment Jingya. What accounts would change [as compared to part (a)] on the three income statements (Goodkey, Jingya, and consolidate in January Year 5, and what would be the account balances
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