Journal Entries:
1. January 1, 20X8:
Investment in Brown Company (Asset) 85,000
Cash (Asset) 85,000
(To record the acquisition of 40% voting shares of Brown Company for $85,000)
2. December 31, 20X8:
Investment in Brown Company (Asset) 12,000
Equity in Earnings of Brown Company (Revenue) 12,000
(To record Marlow's share of net income of $30,000 x 40%)
3. December 31, 20X8:
Equity in Earnings of Brown Company (Revenue) 4,000
Investment in Brown Company (Asset) 4,000
(To adjust the investment to fair value at the end of the year:
$97,000 - $85,000 = $12,000 x 40% = $4,000)
4. December 31, 20X8:
Cash (Asset) 6,000
Investment in Brown Company (Asset) 6,000
(To record Marlow's share of dividends paid by Brown Company:
$15,000 x 40% = $6,000)
5. December 31, 20X8:
Investment in Brown Company (Asset) 6,000
Equity in Earnings of Brown Company (Revenue) 6,000
(To adjust the investment to fair value after receiving dividends:
$97,000 - $6,000 = $91,000 x 40% = $36,400)
Note: The journal entries for 20X9 are not provided, so they cannot be corrected.