LO$2,4,538.$ Equity method journal entries with intercompany sales of inventory

An investor owns $30\%$ of an investee, and accounts for its investment using the equity method. At the beginning of the year, the Equity Investment was reported on the investor's balance sheet at $$750,000.$ During the year, the investee reported net income of $$300,000$ and paid dividends of $$63,000.$ In addition, the investor sold inventory to the investee, realizing a gross profit of $$90,000$ on the sale. At the end of the year, $40\%$ of the inventory remained unstid by the investee.

a$.$ Provide the equity method journal entries required for the year

L$0145.$ Effects of qualifying as a business on asset acquisitions

Assume on January $1,2022$ an investor company paid $$4,500$ to an investee company in exchange for the following assets and liabilities transferred from the investee company:

$\backslash$table$[[$Asset $($Liability$),\backslash$table$[[$Investee$\text{'}$s$],[$Book Value$]],\backslash$table$[[$Estimated$],[$Fair Value$]]],[$Production equipment.,$ $600,$$ $240],[$Factory$,3,000,2,400],[$Land$,200,1,200],[$Patents$,0,960]]$

In addition, the investor provided to the seller contingent consideration with a fair value of $$400$ and the investor paid an additional $$100$ of transaction costs to an unaffiliated third party. The contingent consideration has a potential settlement value of $$900$ in two years, and is not a derivative financial instrument. The book values are from the investee's financial records immediately before the exchange. The fair values are measured in accordance with FASB ASC $820$: Fair Value Measurement.

Parts a$.$ and b$.$ are independent of each other.

a$.$ Provide the journal entry recorded by the investor company assuming that the net assets transferred from the investee do not qualify as a "business," as that term is defined in FASB ASC Master Glossary.

b$.$ Provide the journal entry recorded by the investor company assuming that the net assets transferred from the investee qualify as a "business," as that term is defined in FASB ASC Master Glossary.