Problem 1-28 (Static) (LO 1-4, 1-5, 1-6b 1-7)

Harper, Inc., acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2020, for $210,000 in cash. The book value of Kinmans net assets on that date was $400,000, although one of the companys buildings, with a $60,000 carrying amount, was actually worth $100,000. This building had a 10-year remaining life. Kinman owned a royalty agreement with a 20-year remaining life that was undervalued by $85,000.

Kinman sold inventory with an original cost of $60,000 to Harper during 2020 at a price of $90,000. Harper still held $15,000 (transfer price) of this amount in inventory as of December 31, 2020. These goods are to be sold to outside parties during 2021.

Kinman reported a $40,000 net loss and a $20,000 other comprehensive loss for 2020. The company still manages to declare and pay a $10,000 cash dividend during the year.

During 2021, Kinman reported a $40,000 net income and declared and paid a cash dividend of $12,000. It made additional inventory sales of $80,000 to Harper during the period. The original cost of the merchandise was $50,000. All but 30 percent of this inventory had been resold to outside parties by the end of the 2021 fiscal year.

Required:

Prepare all journal entries for Harper for 2020 and 2021 in connection with this investment. Assume that the equity method is applied. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to the nearest whole number.)