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Pirate Corporation purchased 100 percent ownership of Ship Company on January 1, 20X5, for $277,000. On that date, the book value of Ship’s reported net assets was $209,000. The excess over book value paid is attributable to depreciable assets with a rema

Pirate Corporation purchased 100 percent ownership of Ship Company on January 1, 20X5, for $277,000. On that date, the book value of Ship’s reported net assets was $209,000. The excess over book value paid is attributable to depreciable assets with a remaining useful life of 5 years. Net income and dividend payments of Ship in the following periods were as shown below:
 

YearNet IncomeDividends
20X5$37,000
$18,000
20X6
57,000

28,000
20X7
37,000

48,000


Required:
Prepare journal entries on Pirate Corporation’s books relating to its investment in Ship Company for each of the three years, assuming it accounts for the investment using the equity method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)


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answered by: Patrick J Boyd
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Pirate Corporation purchased 100 percent ownership of Ship Company on January 1, 20X5, for $277,000. On that date, the book value of Ship’s reported net assets was $209,000. The excess over book value paid is attributable to depreciable assets with a rema
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