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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
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. Dr. Cr
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