Prepare the appropriate journal entries from the purchase

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As a long-term investment, Metro Equipment Company purchased 20% of Denver Supplies Inc.'s 400,000 shares for $477,500 and paid $2,500 brokerage fee at the beginning of the fiscal year of both companies (January 1, 20x1). On the purchase date, the fair value and book value of Denver's net assets were equal. During the year, Denver earned net income of $250,000 and distributed cash dividends of 25 cents per share. At year-end, the fair value of the shares is $505,000. On January 1, 20x2, Metro sold 15,000 shares of Denver's stock for $10 per share and paid $400 brokerage fee.

Rquired: Journal entries for XY

Problem i. Assume no significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year and sale on January 1, 20x2.

Problem ii. Assume significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year and sale on January 1, 20x2.

Reference no: EM132794775

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