1. Prepare all the journal entries necessary by Mild Corporation (MC) to record their investment in Orange Manufacturing (OMI) Common Stock for 2019 and 2020. Explain the purpose of each journal entry and show supporting calculations for all amounts.
2. Prepare the journal entry to record the acquisition of the additional 70% of OMI on January 2, 2021 assuming MC uses the equity method for internal accounting purposes. Your entry should include any adjustment, if necessary, to the carrying value of the existing 30% holding. State any assumptions made.
3. Briefly discuss how MC will report its investment in OMI in 2021 for financial reporting purposes. What additional information (in addition to OMIs accounting records) will need to be gathered as of January 2, 2021 (effectively December 31, 2020)?

Mild Corporation (MC) provides water filtration services to companies that need clean filtered water. They recommend pumps, filters and other parts produced and distributed by Orange Manufacturing Inc. (OMI). Because of their knowledge of the industry and the quality of OMI's products MC had invested in OMI common stock by purchasing a 30% position in OMI on January 1, 2019. With the 30% holding and the appointment of the CEO of Mild Corporation to Orange Manufacturing's Board of Directors, MC has significant influence over the operating and financing decisions of OMI. MC accounts for the investment in OMI using the equity method. On January 1, 2019, MC purchased 30% of OMI's common stock for $16,470,000. Both companies have a December 31 fiscal year-end. At December 31, 2018, OMI reported total stockholders' equity of $8,160,000. The difference between fair value and book value was due to a patent with a fair value of $13,800,000 (MC's 30% share was $4,140,000) and a book value of $0; a building whose fair value exceeds its book value by $6,600,000 with a 10-year remaining economic life; and the balance attributed to goodwill. The patent (patent #13628) has a 6-year life on January 1, 2019. MC has no sales to OMI; however, it purchases a relatively high amount from OMI. During 2019, purchases by MC from OMI totaled $17,380,000 and $3,750,000 remains in MC's inventory at December 31, 2019. OMI has a gross profit rate (gross profit as a percentage of sales) of 32%. During 2020, purchases by MC from OMI totaled $31,220,000 and $5,625,000 remains in MC's inventory at December 31, 2020. OMI reports the following net incomes and dividends (declared and paid) for the period January 1, 2019 to December 31, 2020: Net income Dividends Year-end Market Cap. 2019: $24,360,000 10,800,000 $59,292,000 2020: 36,472,000 12,360,000 $66,407,040 On January 2, 2021, Mild Corporation purchases the remaining 70% of OMI's common stock for $56,000,000. At December 31, 2020 OMI reported total stockholders' equity of $45,832,000. Ignore taxes