Differential Assigned to Land and Equipment
Rod Corporation purchased 100 percent ownership of Stafford Corporation on January 1, 20X4, for $65,000, which was $10,000 above the underlying book value. Half the additional amount was attributable to an increase in the value of land held by Stafford, and half was due to an increase in the value of equipment. The equipment had a remaining economic life of five years on January 1, 20X4. During 20X4, Stafford reported net income of $12,000 and paid dividends of $4,500.
Required
Give the journal entries that Rod Corporation recorded during 20X4 related to its investment in Stafford Corporation, assuming Rod uses the equity method in accounting for its investment.
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