Making consolidated financial statements

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Magellan Corporation acquired 80 percent ownership of Dipper Corporation on January 1, 2008, for $200,000. At that date, Dipper reported common stock outstanding of $75,000 and retained earnings of $150,000. The fair value of the noncontrolling interest was $50,000. The differential is assigned to equipment, which had a fair value $25,000 greater than book value and a remaining economic life of five years at the date of the business combination. Canton reported net income of $40,000 and paid dividends of $20,000 in 2008.

Required:

1) Provide the journal entries recorded by Magellan during 2008 on its books if it accounts for its investment in Dipper using the equity method.

2) Give the eliminating entries needed at December 31, 2008, to prepare consolidated financial statements.

Reference no: EM13128818

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