Income Investment Ravine Corporation purchased 30 percent ownership of Valley Industries for $90,000 on January 1, 20X6, when Valley had capital stock of $240,000 and retained earnings of $60,000

Income Investment

Ravine Corporation purchased 30 percent ownership of Valley Industries for $90,000 on January 1, 20X6, when Valley had capital stock of $240,000 and retained earnings of $60,000. The following data were reported by the companies for the years 2016 through 2019:

1. What net income would Ravine Corporation have reported for each of the years, assuming Ravine accounts for the intercorporate investment using (1) the cost method and (2) the equity method?
2. Give all appropriate journal entries for 2018 that Ravine made under both the cost and the equity methods.