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Homework answers / question archive / Differential Attributable to Depreciable Assets Capital Corporation purchased 100 percent of Cook Company’s stock on January 1, 2014, for $340,000

Differential Attributable to Depreciable Assets Capital Corporation purchased 100 percent of Cook Company’s stock on January 1, 2014, for $340,000

Accounting

Differential Attributable to Depreciable Assets

Capital Corporation purchased 100 percent of Cook Company’s stock on January 1, 2014, for $340,000. On that date, Cook reported net assets with a historical cost of $300,000 and a fair value of $340,000. The difference was due to the increased value of buildings with a remaining life of 10 years. During 2014 and 2015 Cook reported net income of $10,000 and $20,000 and paid divi- dends of $6,000 and $9,000, respectively. Assuming that Capital Corporation uses (a) the equity method and (b) the cost method in accounting for its ownership of Cook Company, give the journal entries that Capital recorded in 2014 and 2015.

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