Question - On January 1, 2014, Pond Co. paid $240,000 to acquire10% of Ramp Co. when the book value of Ramp's net assets was 2,400,000. On that date, Ramp's assets and liabilities have fair values approximate to their book values. During 2014, Ramp generated net income of $430,000 and paid a cash dividend of $100,000 to its stockholders. Ramp's stocks are not publicly traded, and therefore the fair values are not available.
On January 1, 2015, Pond Co. acquired an additional 30% of Ramp Co. for $900,000, and gained significant influence over Ramp. On that date, Ramp reported assets and liabilities with book values of $3,795,000 and $1,065,000, respectively. A building owned by Ramp had an appraised value of $450,000, although it had a book value of only $270,000. This building had a 12-year remaining life and no salvage value. It was being depreciated on the straight-line basis. Ramp's other assets and liabilities have fair values approximate to their book values.
Ramp generated net income of $510,000 in 2015, and paid a cash dividend of $120,000 to its stockholders. In 2015, Ramp sold inventory to Pond for $270,000. This inventory had cost only $162,000. Pond resold $180,000 of the inventory during 2015 and the rest is expected to be sold during 2016.
Prepare all of Pond Co.'s journal entries for its investment in Ramp Co. for year of 2014 and 2015.