Advanced Accounting 12th Edition by Joe Ben Hoyle,Thomas Schaefer , Timothy Doupnik

Exercise 3

On January 1, 2015, Alamar Corporation acquired a 40 percent interest in Burks, Inc., for $210,000. On that date, Burks's balance sheet disclosed net assets with both a fair and book value of $360,000. During 2015, Burks reported net income of $80,000 and declared and paid cash dividends of $25,000. Alamar sold inventory costing $30,000 to Burks during 2015 for $40,000. Burks used all of this merchandise in its operations during 2015. Prepare all of Alamar's 2015 journal entries to apply the equity method to this investment.