pure company acquired 80 percent of the

Question

Pure Company acquired 80 percent of the outstanding common stock of Saxxon Company on 2^nd January, 2013 for $675,000. At that time, Saxxon's total stockholders' equity amounted to $1,000,000. Saxxon Company reported dividends and net income for the last two years as given:

                                                         2013            2014
Reported net income
                                                        $45,000        $60,000
Dividends distributed
                                                         35,000          75,000
Required:

Prepare journal entries for Pure Company for 2013 and 2014 assuming Pure uses:

A. The cost method to record its investment

B. The total equity method to record its investment. The difference between implied value and book value of equity acquired was attributed solely to a building, with a 20-year expected life.