Ravine Corporation purchased 30 percent ownership of Valley Industries for $84,000 on January 1, 20X6, when Valley had capital stock of $240,000 and retained earnings of $40,000. During the period of January 1, 20X6, through December 31, 20X9, the market value of Ravine's investment in Valley's stock increased by $10,000 each year. The following data were reported by the companies for the years 20X6 through 20X9: Dividends Declared Year 20X6 20x7 20x8 20x9 Operating Income, Ravine Corporation $150,000 80,000 223,000 170,000 Net Income, Valley Industries $34,000 54,000 10,000 44,000 Ravine $ 76,000 76,000 96,000 106,000 Valley $24,000 44,000 40,000 24,000 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. Complete this question by entering your answers in the tabs below. Complete this question by entering your answers in the tabs below. Required A Required B Determine the amounts reported by Gant as income from its investment in Temp for e investment in Temp at the end of each year assuming that Gant uses the fair value of Temp. 20X6 20X7 20X8 Income from investment Balance in investment Required A Required B > Required A Required B1 Required B2 Give all appropriate journal entries for 20X8 that Ravine would make if it carries the investment at fair value. (If no entry is required fo a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the unrealized gain from Valley Industries under the fair value method. Note: Enter debits before credits. Event General Journal Debit Credit 2 Required A Required B1 Required B2 Give all appropriate journal entries for 20X8 that Ravine would make if it uses the equity method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the dividend received from Valley Industries under the equity method. Note: Enter debits before credits. Event General Journal Debit Credit 1 Required A Required B1 Required B2 Give all appropriate journal entries for 20X8 that Ravine would make if it uses the equity method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the share in net income of Valley Industries under the equity method. Note: Enter debits before credits. Event General Journal Debit Credit 2
