Selected Ledger Account Balances (Before Closing Entries) of Pome Corporation

Essay

Selected ledger account balances (before closing entries) of Pome Corporation on September 30, 2006, one year after the business combination with an 80%-owned subsidiary, were as follows:
The carrying amount of Soper's identifiable net assets on September 30, 2005, was $1,200,000, which was the same as their current fair value on that date. Soper had a net income of $80,000 and declared and paid dividends of $20,000 during the fiscal year ended September 30, 2006. Goodwill was unimpaired on September 30, 2006.

Prepare an adjusting entry on September 30, 2006, to convert Pome Corporation's accounting for the operations of Soper Company to the equity method of accounting from the cost method of accounting. Disregard income taxes.