X purchased 30% of Y of Y on January 1, 2002 for $300,000. On the date, Y's net assets of Y had a book value of $500,000. Any Acquisition Differential on the acquisition date is to be allocated to Y's Equipment, which had a remaining useful life of 5 years from the date of acquisition. Y paid dividends of $20,000 in each year.
Y's income statements for 2002 and 2003 showed the following:
2002 2003
Net Income (Loss) before extraordinary items: $150,000 ($30,000)
Extraordinary Gain (net of tax) $ 50,000 -
Net Income (Loss) $200,000 ($30,000)
Required:
A. Prepare X's journal entries for 2002 and 2003, assuming that this is a significant influence investment.
B. Prepare X's journal entries for 2002 and 2003, assuming that this is a Portfolio Investment.