Chapter 5, Problem 5.26P

Equity Entries with Differential
Plug Corporation acquired 35 percent of Spark Corporation’s stock on January 1,20X8, by issuing25,000 shares of its $2 par value common stock. Spark Corporation’s balance sheet immediatelybefore the acquisition contained the following items:

Shares of Plug were selling at $8 at the time of the acquisition. On the date of acquisition, the remaining economic life of buildings and equipment held by Spark was 20 years. The amountof the differential assigned to goodwill is not impaired. For the year 20X8, Spark reported net income of $70,000 and paid dividends of $10,000.
Required
a. Give the journal entries recorded by Plug Corporation during 20X8 related to its investmentin Spark Corporation.
b. What balance will Plug report as its investment in Spark at December 31, 20X8?