Question
On January 1, 2013, Ohio purchased all the outstanding common shares of Buckeye Co. for $3,500,000 cash. At the date of acquisition, Buckeye equity accounts
On January 1, 2013, Ohio purchased all the outstanding common shares of Buckeye Co. for $3,500,000 cash.
At the date of acquisition, Buckeye equity accounts had the following balances:
Common Stock $500,000
Paid in Capital $1,800,000
Retained Earnings $700,000
All of Buckeye's assets were fairly stated except for the following:
Book Value Fair Value Estimated Life
Equipment $180,000 $270,000 5 years
Building 600,000 800,000 10 years
Buckeye also had a copyright with a fair value of $160,000 with a remaining life of 5 years
During 2013, Buckeye reported net income of $1,325,000 and paid dividends of $850,000
During 2014, Buckeye reported net income of $900,000 and paid dividends of $1,100,000
Assume that Ohio uses the equity method to account for its investment in Buckeye. Prepare all the journal entries to be made on its (Ohio's) books for 2013 and 2014. Explain why the entries are made,
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