Question - Boxwell Corporation purchased 60 percent of Conway Company on January 1, 20X7, for a total of $277,500. Conway reported the following operating results for the next three years:
Year Net Income Dividends Paid 20X7 $45,000 $25,000 20X8 $55,000 $35,000 20X9 $30,000 $10,000
On January 1, 20X7, Conway has $250,000 of $5 par common stock outstanding and retained earnings of $150,000. At that date, Conway held land with a book value of $22,500 and a market value of $30,000 and equipment with a book value of $320,000 and a market value of $360,000. The remainder of the purchase price was attributable to patents, which had a remaining economic life of 10 years. All depreciable assets held by Conway on the date of acquisition had a remaining economic life of six years.
Analyze the data given and answer the following question-
1. Prepare the eliminating entries needed at January 1, 20X7, to prepare a consolidated balance sheet.
2. Compute the balance of the Boxwell's investment in Conway at January 1, 20X9, assuming the equity method is used.
3. Prepare the journal entries recorded by Boxwell with regard to its investment in Conway during 20X9.
4. Prepare the eliminating entries needed at December 31, 20X9, to prepare the consolidated income statement, retained earnings statement, and balance sheet.