On 1/1/xx, Company A purchases 100% of Company B for $100,000 cash. On 12/31/xx, Company B realizes a profit of $20,000 and pays dividends of $5,000 (please Show calculation and explanation of the process, why).

What comments could be made to convey this process? Are below answer are correct? Why should the investment account on 1/1xx be $0?

Credit Debit $100,000 Date Account Title and Explanation 1/1/XX Investment Cash (To record the investment made in Co. B) $100,000 $20.000 31/12/XX Investment Equity income (To record the equity income) $20,000 $5,000 31/12/XX Cash Investment (To record the dividends received from Co. B) $5,0001 Amount $0 Investment account 1/1/XX balance Add: Additions: Investment purchased Equity income $100,000 $20,000 $120,000 $120,000 Less: Deductions Dividends received 31/12/XX balance $5,000 ($5,000 $115,000