Question - Capital Corporation purchased 100 percent of Cook Company's stock on January 1, 20X4, for $340,000. On that date, Cook reported net assets with a historical cost of $300,000 and a fair value of $340,000. The difference was due to the increased value of buildings with a remaining life of 10 years. During 20X4 and 20X5 Cook reported net income of $10,000 and $20,000 and paid dividends of $6,000 and $9,000, respectively.
Assuming that Capital Corporation uses the equity method in accounting for its ownership of Cook Company. Prepare the journal entries that Capital recorded in 20X4 and 20X5.
a. Record purchase of Cook Company Stock for 20X4.
b. Record dividend from Cook Company for 20X4.
c. Record equity-method income/loss for 20X4.
d. Record the amortization of differential value for 20X4.
e. Record dividend from Cook Company for 20X5.
f. Record equity-method income/loss for 20X5.
g. Record the amortization of differential value for 20X5.