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Ravine Corporation purchased 40 percent ownership of Valley Industries for $116,400 on January 1, 20X6, when Valley had capital stock of $246,000 and retained earnings of $45,000. The following data were reported by the companies for the years 20X6 through 20X9: Dividends Declared Operating Income, Net Income, Valley Year Ravine Corporation Valley Industries Ravine 20X6 20X7 20X8 20X9 $149,000 94,000 224,000 169,000 $41,000 61,000 10,000 51,000 $ 74,000 $31,000 74,000 94,000 104,000 51,000 40,000 31,000 Required: a. What net income would Ravine Corporation have reported for each of the years, assuming Ravine accounts for the intercorporate investment using the cost method and the equity method? Net Income Year Cost Method Equity Method 20X6 20X7 20X8 20X9b-1. Give all appropriate journal entries for 20X8 that Ravine made under the cost method. (If no entry is required for a transaction/event, select No journal entry required in the first account field.) View transaction list Journal entry worksheet Record the dividend received from Valley Industries under the cost method. Note: Enter debits before credits. Event General Journa Debit Credit Record entry Clear entry View general journalb-2. Give all appropriate journal entries for 20X8 that Ravine made under the equity method. (If no entry is required for a transaction/event, select No journal entry required in the first account field.) View transaction list Journal entry worksheet 2 Record the dividend received from Valley Industries under the equity method. Note: Enter debits before credits. Event General Journal Debit Credit Record entry Clear entry View general journal

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Answer #1

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Summary:

Net Income
Year Cost Method Equity Method
20X6 $ 161,400 $165,400
20X7 $114,400 $118,400
20X8 $236,000 $228,000
20X9 $181,400 $189,400

Requirement a: 1) Ravine Corporation net income under Cost Mcthod Income of . Ravine ($) Share of Valley (S Net Year Income (b-1) Dividend received from Valley industrics under Cost method Event General Journal Debit (S) Credit (S) Cash ($40,000 x 0,40 16,000 Dividend income (*$30,000 Investment in Valley Stock 0.40 12,000 4,000 To record dividend received from Valley Industries b-2) Dividend received from Valley industries under Equity method Event General Journal 0.40 Debit (S) Credit (S Cash ($40,000 16,000 16,000 Investment in Valley Stock To record dividend received from Valley Industries Event General Journal Debit (S) Credit (S Investment in Valley Stock 4,000 Income from Valley ($10,000 x 0.40 4,000 To record income from Valley Industrics Created by Universal Document Converter

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