Pure Company acquired 80% of the outstanding common stock of Saxxon Company on January 2, 2016 for $675,000. At that time, Saxxon's total stockholders' equity amounted to $1,000,000. Saxxon Company reported net income and dividends for the last two years as follows: Required:
Prepare journal entries for Pure Company for 2016 and 2017 assuming Pure uses:
A. The cost method to record its investment
B. The complete equity method to record its investment. The difference between implied value and the book value of equity acquired was attributed solely to a building, with a 20-year expected life.

Question

Pure Company acquired 80% of the outstanding common stock of Saxxon Company on January 2, 2016 for $675,000. At that time, Saxxon's total stockholders' equity amounted to $1,000,000. Saxxon Company reported net income and dividends for the last two years as follows:  Required:
Prepare journal entries for Pure Company for 2016 and 2017 assuming Pure uses:
A. The cost method to record its investment
B. The complete equity method to record its investment. The difference between implied value and the book value of equity acquired was attributed solely to a building, with a 20-year expected life.

Quizplus · Accepted Answer

The Answer of Pure Company acquired 80% of the outstanding common stock of Saxxon Company on January 2, 2016 for $675,000. At that time, Saxxon's total stockholders' equity amounted to $1,000,000. Saxxon Company reported net income and dividends for the last two years as follows:  Required:
Prepare journal entries for Pure Company for 2016 and 2017 assuming Pure uses:
A. The cost method to record its investment
B. The complete equity method to record its investment. The difference between implied value and the book value of equity acquired was attributed solely to a building, with a 20-year expected life.

Pure Company Acquired 80% of the Outstanding Common Stock of Saxxon