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Using the Equity Method of Accounting On 1/1/xx, Company A purchases 100% of Company B for...

Using the Equity Method of Accounting

On 1/1/xx, Company A purchases 100% of Company B for $100,000 cash. On 12/31/xx, Company B realizes profit of $20,000 and pays dividends of $5,000:

1. Prepare all required entries for Company A associated with the above activities utilizing the equity method.

2. Determine the balance in Company A’s investment account at the end of the year.

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