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

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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