Equity Method Accounting: Pawn Corporation reported the following balances at January 1, 2012: ...
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Equity Method Accounting: Pawn Corporation reported the following balances at January 1, 2012:
Item
Book Value
Fair Value
Cash & Accounts Receivable
210,000
210,000
Equipment, net
240,000
300,000
Internally Developed Software
300,000
520,000
Accounts Payable
(150,000)
(150,000)
Common Stock ($10 Par Value)
(200,000)
Additional Paid in Capital
(60,000)
Retained Earnings
(340,000)
On January 1, 2012, King Corporatin purchased 30% of Pawn Corporation's voting stock for $300,000 Cash. As a result, King has the ability to exercise significant influence over pawn. On this date, Pawn's equipment had a remaining useful life of 5 years, while the software's life was estimated at 10 years. During 2012, pawn declared and paid cash dividends of $20,000 and reported net income of $100,000 for the year. In addition, at year end, pawn's inventory balance includes $60,000 of product purchased from King where King recognized a 20% gross margin.
Required: Give all journal entries that King recorded during 2012 with respect to its investment. Also, what is the investment account balance that King will report at year end?
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