On July 1, 2013, Walter Allen Inc. purchased 6,000 shares of the outstanding common stock of Piaffe Corporation at a cost of $140,000. Piaffe had 30,000 shares of outstanding common stock. Assume the total book value and fair value of net assets is $650,000. Both companies have a January through December fiscal year. The following data pertains to Piaffe Corporation during 2013:
Dividends declared and paid, Jan. 1 - June 30 $12,000
Dividends declared and paid, July 1 - Dec. 31 $12,000
Net income, Jan.1 - June 30 $14,000
Net income, July 1 - Dec. 31 $18,000
1. Prepare the entry to record the original investment in Piaffe.
2. Compute any goodwill on the acquisition.
3. Prepare all other entries for 2013 under the equity method.