Reference no: EM132481760

Question - Planner Corporation purchased 100 percent of Schedule Company's stock on January 1, 20X4, for $340,000. On that date, Schedule reported net assets with a historical cost of $300,000 and a fair value of $340,000. The difference was due to the increased value of buildings with a remaining life of 10 years. During 20X4 and 20X5, Schedule reported net income of $10,000 and $20,000 and paid dividends of $6,000 and $9,000, respectively.

Required -

(a) Assuming that Planner Corporation uses the equity method in accounting for its ownership of Schedule Company. Prepare the journal entries that Planner recorded in 20X4 and 20X5. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. Record the purchase of Schedule Company on January 1, 20X4.

2. Record the dividend from Schedule Company for 20X4.

3. Record the equity-method income/loss for 20X4.

4. Record the amortization of the differential value for 20X4.

5. Record the dividend from Schedule Company for 20X5.

6. Record the equity-method income/loss for 20X5.

7. Record the amortization of the differential value for 20X5.

(b) Assuming that Planner Corporation uses the cost method in accounting for its ownership of Schedule Company. Prepare the journal entries that Planner recorded in 20X4 and 20X5. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. Record the purchase of Schedule Company on January 1, 20X4.

2. Record the dividend income from Schedule Company for 20X4.

3. Record the dividend income from Schedule Company for 20X5.