Question
Pirate Corporation purchased 100 percent ownership of Ship Company on January 1, 20X5, for $277,000. On that date, the book value of Ships reported net
Pirate Corporation purchased 100 percent ownership of Ship Company on January 1, 20X5, for $277,000. On that date, the book value of Ships reported net assets was $203,000. The excess over book value paid is attributable to depreciable assets with a remaining useful life of 5 years. Net income and dividend payments of Ship in the following periods were as shown below:
Year | Net Income | Dividends | ||||
20X5 | $ | 36,000 | $ | 17,000 | ||
20X6 | 56,000 | 27,000 | ||||
20X7 | 36,000 | 43,000 | ||||
Required: Prepare journal entries on Pirate Corporations books relating to its investment in Ship Company for each of the three years, assuming it accounts for the investment using the equity method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
1 Record the purchase of Ship Company for 20X5. Record the dividend from Ship Company for 20X5. Record the equity-method income for 20X5. 4 Record the amortization of differential value for 20X5. Record the dividend from Ship Company for 20x6. Record the equity-method income for 20X6. Record the amortization of the differential value for 20X6. Record the dividend from Ship Company for 20x7. 9 Record the equity-method income for 20x7. 10 Record the amortization of the differential value for 20x7Step by Step Solution
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