Reference no: EM131874445

Question - Pure Company acquired 80% of the outstanding common stock of Saxxon Company on January 2, 2013 for $675,000. At that time, Saxxon's total stockholders' equity amounted to $1,000,000. Saxxon Company reported net income and dividends for the last two years as follows:

2013 2014

Reported net income $45,000 $60,000

Dividends distributed 35,000 75,000

Required: Prepare journal entries for Pure Company for 2013 and 2014 assuming Pure uses:

A. The cost method to record its investment

B. The complete equity method to record its investment. The difference between implied value and the book value of equity acquired was attributed solely to a building, with a 20-year expected life.