Reference no: EM132794749

Waters, Inc. acquired 17 percent of Denton Corporation on January 1, 2019, for $401,250 although Denton's book value on that date was $2,100,000. Denton held land that was undervalued by $150,000 on its accounting records. During 2019, Denton earned a net income of $180,000 while paying cash dividends of $200,000. On January 1, 2020, Waters purchased an additional 11 percent of Denton for $309,820. Denton's land is still undervalued on that date, but then by $300,000. Any additional excess cost was attributable to a trademark with a 15-year life for the first purchase and a 14-year life for the second. The initial 17 percent investment had been maintained at cost because fair values were not readily available. The equity method will now be applied. During 2020, Denton reported income of $220,000 and distributed dividends of $140,000.

Problem 1: Prepare all of the 2020 journal entries for Waters.