Question
Ravine Corporation purchased 30 percent ownership of Valley Industries for $86,400 on January 1, 20X6, when Valley had capital stock of $246,000 and retained earnings
| Ravine Corporation purchased 30 percent ownership of Valley Industries for $86,400 on January 1, 20X6, when Valley had capital stock of $246,000 and retained earnings of $42,000. The following data were reported by the companies for the years 20X6 through 20X9: |
| Dividends Declared | ||||||||||||
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| Year | Operating Income, Ravine Corporation | Net Income, Valley Industries | Ravine | Valley | ||||||||
| 20X6 | $ | 160,000 | $ | 39,000 | $ | 82,000 | $ | 29,000 | ||||
| 20X7 | 85,000 | 59,000 | 82,000 | 49,000 | ||||||||
| 20X8 | 227,000 | 10,000 | 102,000 | 40,000 | ||||||||
| 20X9 | 180,000 | 49,000 | 112,000 | 29,000 | ||||||||
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| Required: |
| a. | What net income would Ravine Corporation have reported for each of the years, assuming Ravine accounts for the intercorporate investment using the cost method and the equity method? |
| b-1. | Give all appropriate journal entries for 20X8 that Ravine made under the cost method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) |
| b-2. | Give all appropriate journal entries for 20X8 that Ravine made under the equity method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) |
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The Audit Process Principles Practice And Cases
Authors: Stuart Manson, Iain Gray, Iain G. Sheffield, I.H. Gray, I. Etal Gray
2nd Edition
1861520107, 9781861520104
