Wholly Owned Subsidiary with Differential
Canton Corporation is a wholly owned subsidiary of Winston Corporation. Winston acquired ownership of Canton on January 1, 20X3, for $28,000 above Canton’s reported net assets. At that date, Canton reported common stock outstanding of $60,000 and retained earnings of $90,000. The differential is assigned to equipment with an economic life of seven years at the date of the business combination. Canton reported net income of $30,000 and paid dividends of $12,000 in 20X3.
Required
a.Give the journal entries recorded by Winston Corporation during 20X3 on its books if Winston accounts for its investment in Canton using the equity-method.
b.Give the eliminating entries needed at December 31, 20X3, to prepare consolidated financial statements.
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