Differential Attributable to Depreciable Assets
Capital Corporation purchased 100 percent of Cook Company’s stock on January 1, 20X4, for $340,000. On that date, Cook reported net assets of $300,000 valued at historical cost and $340,000 stated at fair value. The difference was due to the increased value of buildings with a remaining > life of 10 years. During 20X4 and 20X5 Cook reported net income of $10,000 and $20,000 and paid dividends of $6,000 and $9,000, respectively.
Required
Assuming that Capital Corporation uses (a) the equity-method and (b) the cost method in accounting for its ownership of Cook Company, give the journal entries that Capital recorded in 20X4 and 20X5.
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