During review of the adjusting entries to be recorded on December 31, 20X8, Grand Corporation discovered that it had inappropriately been using the cost method in accounting for its investment in Case Products Corporation. Grand purchased 100 percent ownership of Case Products on January 1, 20X6, for $59,000, at which time Case Products reported retained earnings of $15,000 and capital stock outstanding of $27,000. The differential was attributable to patents with a life of eight years. Income and dividends of Case Products were:
|
Year
|
Net Income
|
Dividends
|
|
20X6
|
|
$
|
18,000
|
|
|
$
|
10,000
|
|
|
20X7
|
|
|
26,000
|
|
|
|
12,000
|
|
|
20X8
|
|
|
34,000
|
|
|
|
12,000
|
|
Required:
Prepare the correcting entry required on December 31, 20X8, to properly report the investment under the equity method, assuming the books have not been closed. Case Products' dividends were declared in early November and paid in early December each year.
I need help to figure out the income from case products and retained earnings. the journal enrty looks like this and should balance out.
investment in case products 37625
dividends income 12,000
income from case products xxxxx
retained earnings xxxxx