On January 1, 2004, Ruark Corporation acquired a 40 percent interest in Batson, Inc., for $210,000. On that date, Batson's balance sheet disclosed net assets of $360,000. During 2004, Batson reported net income of $80,000 and paid cash dividends of $25,000. Ruark sold inventory costing $30,000 to Batson during 2004 for $40,000. Batson used all of this merchandise in its operations during 2004.
Make all of Ruark's journal entries for 2004 to apply the equity method to this investment.
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(Equity entries for one year, includes intercompany transfers but no unearned gain)
Purchase Price of Batson Stock $210,000
Book Value of Batson Stock ($360,000 x 40%) (144,000)
Goodwill $66,000 ...
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