Reference no: EM132617918
On January 1, 2018, Jolley Corp. paid...
On January 1, 2018, Jolley Corp. paid $250,000 for 25% of the voting common stock of Tige Co. On that date, the book value of Tige was $850,000. A building with a carrying value of $160,000 was actually worth $220,000. The building had a remaining life of twenty years. Tige owned a trademark valued at $90,000 over cost that was to be amortized over 20 years.
During 2018, Tige sold to Jolley inventory costing $60,000, at a markup of 50% on cost. At the end of the year, Jolley still owned some of these goods with an intra-entity selling price of $33,000. Jolly uses a perpetual inventory system.
Tige reported net income of $200,000 during 2018. This amount included a gain of $35,000. Tige paid dividends totaling $40,000.
Required:
Problem 1: Prepare a of Jolley's journal entries for 2018 in relation to Tige Co. Assume the equity method is appropriate for use.