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Ravine Corporation purchased 30 percent ownership of Valley Industries for $87,300 on January 1, 20X6, when Valley had capital stock of $245,000 and retained earnings

Ravine Corporation purchased 30 percent ownership of Valley Industries for $87,300 on January 1, 20X6, when Valley had capital stock of $245,000 and retained earnings of $46,000. During the period of January 1, 20X6, through December 31, 20X9, the market value of Ravine's investment in Valley's stock increased by $11,000 each year. The following data were reported by the companies for the years 20X6 through 20X9:

Dividends Declared
Year Operating Income, Ravine Corporation Net Income, Valley Industries Ravine Valley
20X6 $ 147,000 $ 40,000 $ 75,000 $ 30,000
20X7 88,000 60,000 75,000 50,000
20X8 224,000 10,000 95,000 40,000
20X9 167,000 50,000 105,000 30,000

Required: a. What net income would Ravine Corporation have reported for each of the years, assuming Ravine accounts for the intercorporate investment either by carrying the investment at fair value, or by using the equity method? b-1. Give all appropriate journal entries for 20X8 that Ravine would make if it carries the investment at fair value. b-2. Give all appropriate journal entries for 20X8 that Ravine would make if it uses the equity method.

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