Pratt Company purchased 60% of the outstanding voting shares of Sandy Company at the beginning of...

Pratt Company purchased 60% of the outstanding voting shares of Sandy Company at the beginning of 2013 for $480,000. At the time of purchase, Sandy Company's total stockholders' equity amounted to $650,000. Income and dividend distributions for Sandy Company from 2013 through 2015 are as follows:

	2013	2014	2015
Net income (loss)	70,000	80,000	-55,000
Dividend distribution	-50,000	-40,000	-30,000
Cum. (income - dividends)	20,000	60,000	-25,000

Required:

Prepare journal entries for Pratt Company from the date of purchase through 2014 to account for its investment in Sandy Company under each of the following assumptions:

Pratt Company uses the cost method to record its investment.
Pratt Company uses the partial equity method to record its investment.
Pratt Company uses the complete equity method to record its investment. The difference between the book value of equity acquired and the value implied by the purchase price was attributed solely to a depreciable asset, with a remaining life of 15 years

Do not copy from Chegg, otherwise, I have to report the answer.

Expert Solution

A
1-Jan-13	Investment A/c Dr.	480000
	To Cash a/c		480000

2013	Cash a/c Dr.	30000
	To dividend received		30000

2014	Cash a/c Dr.	24000
	To dividend received		24000

B
1-Jan-13	Investment A/c Dr.	480000
	To Cash a/c		480000

31-Jan-13	Investment A/c Dr.	42000
	Equity in Sandy Income A/c		42000

	Cash a/c Dr.	30000
	To Investment A/c		30000

31-Jan-14	Investment A/c Dr.	48000
	Equity in Sandy Income A/c		48000

	Cash a/c Dr.	24000
	To Investment A/c		24000

C
1-Jan-13	Investment A/c Dr.	480000
	To Cash a/c		480000

31-Jan-13	Equity in Sandy Income A/c	6000
	To Investment A/c		6000

	Investment A/c Dr.	42000
	Equity in Sandy Income A/c		42000

	Cash a/c Dr.	30000
	To Investment A/c		30000

31-Jan-14	Income from Sandy Co. A/c Dr.	6000
	To Investment A/c		6000

	Investment A/c Dr.	48000
	Equity in Sandy Income A/c		48000

	Cash a/c Dr.	24000
	To Investment A/c		24000

depreciable asset value=	Purchase price-share in sandy equity
		=	480000-390000
			90000
	Life		15
	amortization per year	6000

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