Top Company obtained 100 % of Bottom Company's common stock on 1st January, 20X6 by issuing 12,500 shares of its own common stock, which had a $5 par value and a $15 fair value on that date. Bottom reported a net book value of $150,000 and its shares had a $20 per share fair value on that date. Thus, some of its plant assets (with a 5-year remaining life) were undervalued by $20,000 in company's accounting records. Bottom had also prepared a customer list with an estimated fair value of $10,000 and a remaining life of 10 years. Top Company uses equity-method to account for its investment in Bottom. During 2006 Top and Bottom reported the subsequent:
Net income: Top -$300,000 , Bottom - $200,000
Dividends declared: Top$25,00, Bottom - $15,000
Required:
Prepare each of journal entries listed below related to Top's investment in Bottom.
1. Top's amortization of excess acquisition price.
2. Top's share of Bottom's 2006 income.
3. Top's share of Bottom's 2006 dividend income.
4. Top's acquisition of Bottom.