Chapter 1, Problem 2DYS

Virginia Corp. owned all of the voting common stock of Stateside Co. Both companies use the perpetual inventory method, and Virginia decided to use the partial equity method to account for this investment. During 2020, Virginia made cash sales of $400,000 to Stateside. The gross profit rate was 30% of the selling price. By the end of 2020, Stateside had sold 75% of the goods to outside parties for $420,000 cash.   Prepare journal entries for Virginia and Stateside to record the sales/purchases during 2020.

On January 1, Intergen, Inc., invests $200,000 for a40 percentinterest in Ryan, a new jointventure with two other partners, each investing $150,000 for 30 percent interests. Intergen plansto sell all of its production to Ryan, which will resell the inventory to retail outlets. The equitypartners agree that Ryan will buy inventory only from Intergen. Also, Intergen plans to use theequity methodfor financial reporting.During the year, Intergen expects to incur costs of $850,000 to produce goods with a final retailmarket value of $1,200,000. Ryan projects that, during this year, it will resell three-fourths ofthese goods for $900,000. It should sell the remainder in the following year.The equity partners plan a meeting to set the price Intergen will charge Ryan for its production.One partner suggests a transfer price of $1,025,000but is unsure whether it will result in anequitable return across the equity holders. Importantly, Intergen agrees that its total rate of return(including its…

On January 1, 2020, Ridge Road Company acquired 30 percent of the voting shares of Sauk Trail, Inc., for $4,400,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail’s board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail’s board, which gave it the ability to significantly influence Sauk Trail’s operating and investing activities.   The January 1, 2020, carrying amounts and corresponding fair values for Sauk Trail’s assets and liabilities follow:     Carrying Amount Fair Value Cash and receivables $ 195,000   $ 195,000   Computing equipment   5,765,000     7,060,000   Patented technology   185,000     4,170,000   Trademark   235,000     2,170,000   Liabilities   (270,000 )   (270,000 )     Also, as of January 1, 2020, Sauk Trail’s computing equipment had a…