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