Reference no: EM132004412

Question - On January 1, 2013 Rubio purchased 30% of voting common stock of kitty for $350,000 (cash). Book value of kitty was $950,000. A building that had a carrying value of $250,000 had a FMV of $310,000. Kitty had an undervalued patent worth $50,000 over the book value. Patent had a remaining life of 10 years. The building had 15 years left. Goodwill was the remaining difference.

In 2013 Kitty had a net income of $280,000 and paid $68,000 in dividends.

In 2014 Kitty had a net income of $650,000 and paid dividends of $180,000.

In 2013 Kitty sold inventory with a cost of $60,000 to Rubio that had a markup of 80%.

The end of the year, Rubio didn't sell $20,000 of the inventory at transfer price.

Remaining inventory from 2013 was sold in 2014. There was no other inventory transactions.

Provide journal entires required for Rubio for the purchase and 2013 and 2014 year-ending entries.