On January 1, 2XX2, a parent purchases all of the stock of its subsidiary for $20,000. The subsidiary reports Stockholders' Equity of $16,000 on the date of purchase. The parent assigns the $4,000 excess purchase price to an undervalued building owned by the subsidiary. The building has a 20-year remaining life. All other net assets of the subsidiary have fair values approximating their recorded pre-acquisition carrying values. Subsequent to the acquisition, the subsidiary reports $2,000 of net income and pays dividends of $1,200 during the year ended December 31, 2XX2.

Provide the following journal entries:

a. Record the initial investment at January 1, 2XX2.

		Debit	Credit
	Equity Investment	20000
	Cash		20000
	To record the investment.

b. Record the recognition of Equity Income by the parent for the year ended December 31, 2XX2.

		Debit	Credit
	Equity Income	2000
	Equity Investment		2000
	To record the subsidiary's net income.
	Amortization Expense	200
	Patent		200
	To record AAP amortization.

c. Record the receipt of the dividend during 2XX2.

		Debit	Credit
	Cash	1200
	Equity Investment		1200
	To record the receipt of dividends.