4.1 – Equity Method Accounting

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4.1 – Equity Method Accounting

James Corporation acquired all of the stock of Williams Corporation on January 2, 2010. The book value of the net assets of Williams on that date was $300,000,000 and the fair values of Williams identifiable net assets equaled the book values, except for plant assets undervalued by $50,000,000. The fair market value of the shares issued by James Corporation was $450,000,000. Revalued plant assets are to be straight-line depreciated over 25 years. For the year ended December 31, 2010, Williams reported net income of $80,000,000 and paid dividends of $24,000,000.

Required

Prepare journal entries to record James’ acquisition of Williams and subsequent entries to the investment account for 2010, using the complete equity method. Assume goodwill impairment for 2010 is $25,000,000.