Question
Monroe Company purchased 80% of Adams Company on January 1, 20X1.The purchase price paid was $600,000. On that day, the book value of Adams. was
Monroe Company purchased 80% of Adams Company on January 1, 20X1.The purchase price paid was $600,000. On that day, the book value of Adams. was $500,000. Excess of cost over book value is due to goodwill. Included in Adams's income are intercompany sales to Monroe of $40,000 with a cost to Adams of $25,000.30% of this inventory is on hand in the Monroe inventory at December 31, 20X3. In addition, inventory sold at a profit of $5,000 was in the inventory of Monroe at December 31, 20X2.Adams reported income of $100,000 in 20X3 but paid no dividends.
A. Prepare a schedule of Excess of Cost over Book Value at the date of purchase.
b. For 20X3, prepare on the books of Monroe the full equity method journal entries.
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