On October 1, 2019, sally Company issued 15,000 of its $1 par value common stock and acquired 50,000 of the outstanding shares of Terry Company for $13 per share. The fair value of the shares issued was $52 per share. This acquisition gave sally a 40 percent ownership of Terry.

As of October 1, 2019, the Terry had assets with a book value of $2.4 million and liabilities of $900,000. At the time, Terry owned equipment with a book value of $150,000 and a fair value of $100,000 with a remaining life of 5 years. terry also owned a building with a book value of $700,000 and a fair value of $900,000 and a remaining life of 16 years. Shaun also held a patent with a ten-year remaining life on its books that was undervalued by $250,000. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight-line method.

terry declares dividends at Dec 15 of each year and pays the dividend January 15. Terry income, for 2019 was $600,000 and 2020 was a loss of $100,000. Dividends declared in 2019 were $2.00 per share and $0.50 in 2020.

In addition, Terry sold inventory costing $100,000 to Sarah for $150,000 during 2019. sally resold $90,000 of this inventory during 2019 and the remaining during 2020.

COMPUTE THE GOODWILL ASSOCIATED WITH THIS TRANSACTION.

1. PREPARE ALL REQUIRED JOURNAL ENTRIES FOR 2019 AND 2020
2. WHAT IS THE BALANCE IN THE INVESTMENT ACCOUNT AT 12-31-2020?
3. WHAT IS THE EQUITY INCOME RECORDED IN 2019?