Ravine Corporation purchased 40 percent ownership of Valley Industries for $115,600 on January 1, 20X6, when Valley had capital stock of $241,000 and retained earnings of $48,000. During the period of January 1, 20X6, through December 31, 20X9, the market value of Ravine's investment in Valley's stock increased by $10,000 each year. The following data were reported by the companies for the years 20X6 through 20X9: Operating Income, Net Income, Year Ravine CorporationValley Industries. 20x6 20X7 20x8 20X9 $152,000 86,000 237,000 172,000 $50,000 70,000 10,000 60,000 Required A Dividends Declared Valley $ 40,000 60,000 40,000 40,000 Ravine $ 83,000 83,000 103,000 113,000 Required: a. What net income would Ravine Corporation have reported for each of the years, assuming Ravine accounts for the intercorporate investment either by carrying the investment at fair value, or by using the equity method? b-1. Give all appropriate journal entries for 20X8 that Ravine would make if it carries the investment at fair value b-2. Give all appropriate journal entries for 20X8 that Ravine would make if it uses the equity method. Complete this question by entering your answers in the tabs below. Required B1 Required 82 4
Ravine Corporation purchased 40 percent ownership of Valley Industries for $115,600 on January 1, 20X6, when Valley had capital stock of $241,000 and retained earnings of $48,000. During the period of January 1, 20X6, through December 31, 20X9, the market value of Ravine's investment in Valley's stock increased by $10,000 each year. The following data were reported by the companies for the years 20X6 through 20X9: Operating Income, Net Income, Year Ravine CorporationValley Industries. 20x6 20X7 20x8 20X9 $152,000 86,000 237,000 172,000 $50,000 70,000 10,000 60,000 Required A Dividends Declared Valley $ 40,000 60,000 40,000 40,000 Ravine $ 83,000 83,000 103,000 113,000 Required: a. What net income would Ravine Corporation have reported for each of the years, assuming Ravine accounts for the intercorporate investment either by carrying the investment at fair value, or by using the equity method? b-1. Give all appropriate journal entries for 20X8 that Ravine would make if it carries the investment at fair value b-2. Give all appropriate journal entries for 20X8 that Ravine would make if it uses the equity method. Complete this question by entering your answers in the tabs below. Required B1 Required 82 4
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Ravine Corporation purchased 40 percent ownership of Valley Industries for $115,600 on January 1, 20X6, when Valley had capital
stock of $241,000 and retained earnings of $48,000. During the period of January 1, 20X6, through December 31, 20X9, the market
value of Ravine's investment in Valley's stock increased by $10,000 each year. The following data were reported by the companies for
the years 20X6 through 20X9:
Operating Income, Net Income,
Year Ravine CorporationValley Industries
20x6
20X7
20x8
20X9
$152,000
86,000
237,000
172,000
$50,000
70,000
10,000
60,000
Dividends Declared
Valley
$40,000
60,000
40,000
40,000
Ravine
$ 83,000
83,000
Required A Required B1 Required 82
103,000
113,000
Required:
a. What net income would Ravine Corporation have reported for each of the years, assuming Ravine accounts for the intercorporate
investment either by carrying the investment at fair value, or by using the equity method?
b-1. Give all appropriate journal entries for 20X8 that Ravine would make if it carries the investment at fair value
b-2. Give all appropriate journal entries for 20X8 that Ravine would make if it uses the equity method.
Complete this question by entering your answers in the tabs below.
4
Transcribed Image Text:b-2. Give all appropriate journal entries for 20X8 that Ravine would make if it uses the equity method.
Complete this question by entering your answers in the tabs below.
Required A Required B1 Required B2
What net income would Ravine Corporation have reported for each of the years, assuming Ravine accounts for the
intercorporate investment either by carrying the investment at fair value, or by using the equity method?
Year
20X6
20X7
20X8
20X9
Net Income
Fair Value
Jounal ently workSNEEL
A
Record the dividend received from Valley Industries under the fair value
method.
Event
1
Note: Enter debits before credits.
Record entry
< A
Equity Method
B
Event
1
B
Journal entry worksheet
General Journal
Note: Enter debits before credits.
Clear entry
Debit
Record the dividend received from Valley Industries under the equity method.
General Journal
Credit
Debit
View general journal
Credit
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