On January 1, 2003, Cale Corp. paid $1,020,000 to purchase Kaltop Co. Kaltop maintained separate incorporation. Cale used the equity method to...

On January 1, 2003, Cale Corp. paid $1,020,000 to purchase Kaltop Co. Kaltop maintained separate incorporation. Cale used the equity method to account for the investment. Cale also paid $20,000 to investment bankers to arrange the acquisition. Since it was a cash purchase, there were no issue costs for securities. Katop's assets, liabilities, and stockholders' equity accounts were as follows: 1-Jan-03 FAIR BOOKMARKET VALUEVALUE dr (cr)dr (cr)DIFFERENCE CURRENT ASSET $120,000 $120,000 $- LAND $72,000 $192,000 $120,000 BUILDING (20 YR LIFE) $240,000 $268,000 $28,000 EQUIPMENT (10 YR LIFE) $540,000 $516,000 $(24,000) CURRENT LIABILITIES $(24,000) $(24,000) $- LONG TERM LIABILITIES $(120,000) $(120,000) $- COMMON STOCK $(228,000) ADDITIONAL PAID IN CAPITAL $(384,000) RETAINED EARNINGS $(216,000) CHECK TOTAL $- $952,000 $124,000 PARTIAL WORKSHEET FOR DECEMBER 31, 2003:PART D CALEKALTOPELIMINATIONS dr(cr)dr(cr)drcr INCOME STATEMENT: Revenue $(350,000) Expenses $224,000 E $- Equity income in subsidiary $- I $- $- Net income $(126,000) RETAINED EARNINGS STATEMENT: Retained earnings 1/1/2003 $(216,000) S $216,000 Net income $(126,000) Less dividends paid $48,000 D $48,000 Retained earning 12/31/2003 $(294,000) BALANCE SHEET 12/31/2003 Current assets $162,000 Land $72,000 A $- Buildings $228,000 A $- E $- Equipment $486,000 E $- A $- Goodwill (if any) A $- Investment in Kaltop $- D $48,000 S $828,000 $(780,000) A $- I $- Current liabilities Long term liabilities $(120,000) Common stock $(228,000) S $228,000 Additional paid in capital $(384,000) S $384,000 Retained earnings 1/1/2003 $(216,000) TOTAL BALANCE SHEET $- REQUIRED: C. Create the journal entries to record the income of the subsidiary and the investment of the subsidiary