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EXERCISE 4‐1 Parent Company Entries, Liquidating Dividend LO 2 Percy Company purchased 80% of the outstanding...
EXERCISE 4‐1
Parent Company Entries, Liquidating Dividend LO 2
Percy Company purchased 80% of the outstanding voting shares of Song Company at the beginning of 2019 for $387,000. At the time of purchase, Song Company's total stockholders' equity amounted to $475,000. Income and dividend distributions for Song Company from 2019 through 2021 are as follows:
| 2019 | 2020 | 2021 | |
| Net income (loss) | $63,500 | $52,500 | ($55,000) |
| Dividend distribution | 25,000 | 50,000 | 35,000 |
Required:
Prepare journal entries on the books of Percy Company from the date of purchase through 2021 to account for its investment in Song Company under each of the following assumptions:
- Percy Company uses the cost method to record its investment.
- Percy Company uses the partial equity method to record its investment.
- Percy Company uses the complete equity method to record its investment. The difference between book value of equity acquired and the value implied by the purchase price was attributed solely to an excess of market over book values of depreciable assets, with a remaining life of 10 years.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
EXERCISE 4‐2 Workpaper Eliminating Entries, Cost Method LO 5 Park Company purchased 90% of the stock...
EXERCISE 4‐2 Workpaper Eliminating Entries, Cost Method LO 5
Park Company purchased 90% of the stock of Salt Company on January
1, 2019, for $465,000, an amount equal to $15,000 in excess of the
book value of equity acquired. This excess payment relates to an
undervaluation of Salt Company's land. On the date of purchase,
Salt Company's retained earnings balance was $50,000. The remainder
of the stockholders' equity consists of no‐par common stock. During
2023, Salt Company declared dividends in...
PA4-2 Analyzing and Recording Adjusting Journal Entries [LO 4-1, LO 4-2] Brokeback Towing Company is at...
PA4-2 Analyzing and Recording Adjusting Journal Entries [LO 4-1,
LO 4-2]
Brokeback Towing Company is at the end of its accounting year,
December 31, 2015. The following data that must be considered were
developed from the company’s records and related documents:
a.
On July 1, 2015, a two-year insurance premium on equipment in
the amount of $672 was paid and debited in full to Prepaid
Insurance on that date. Coverage began on July 1.
b.
At the end of 2015,...
On January 1, 2011, Parent Company Purchased 80% of the common stock of Subsidiary Company for...
On January 1, 2011, Parent Company Purchased 80% of the common
stock of Subsidiary Company for $402,000. On this date, Subsidiary
had total owners' equity of $440,000. Land was undervalued by
$20,000, Equipment with a 5-year remaining life was undervalued by
$15,000 and inventory was undervalued by $10,000. Any other excess
of cost over book value is due to goodwill. Parent accounts for its
investment in Subsidiary using the simple equity method.
1) Prepare the Determination and Distribution of Excess...
On January 1, 2020, Parent Company purchased 80% of the common stock of Subsidiary Company for...
On January 1, 2020, Parent Company purchased 80% of the common
stock of Subsidiary Company for $320,000.
On this date, Subsidiary had common stock, other paid-in
capital, and retained earnings of $40,000, $120,000, and $190,000,
respectively.
Net income and dividends for Subsidiary Company were $50,000
and $10,000, respectively.
Parent Company has used the simple equity method for recording
the Subsidiary income and dividends.
On January 1, 2020, the only tangible assets of Subsidiary that
were undervalued were inventory and equipment....
Required information PA4-4 Identifying and Preparing Adjusting Journal Entries [LO 4-1, LO 4-2, LO 4-3, LO...
Required information
PA4-4 Identifying and Preparing Adjusting Journal Entries [LO
4-1, LO 4-2, LO 4-3, LO 4-6]
[The following information applies to the questions
displayed below.]
Val’s Hair Emporium operates a hair salon. Its unadjusted trial
balance as of December 31, 2018, follows, along with information
about selected accounts.
Account Names
Debit
Credit
Further Information
Cash
$
2,800
As reported on December 31 bank statement.
Supplies
3,300
Based on count, only $800 of supplies still exist.
Prepaid Rent
3,000
This...
EXERCISE 5-2 End of the Year of Acquisition Workpaper Entries LO 1 LO 9 On January...
EXERCISE 5-2 End of the Year of Acquisition Workpaper Entries LO
1 LO 9
On January 1, 2020, Payne Corporation purchased a 75% interest
in Salmon Company for $585,000. A summary of Salmon Company’s
balance sheet on that date revealed the following: Book Value Fair
Value Equipment $525,000 $705,000 Other assets 150,000 150,000
$675,000 $855,000 Liabilities $ 75,000 $ 75,000 Common stock
225,000 Retained earnings 375,000 $675,000 The equipment had
an original life of 15 years and has a remaining...
EXERCISE 5-4 Allocation of Cost and Workpaper Entries at Date of Acquisition LO 2 On January...
EXERCISE 5-4
Allocation of Cost and Workpaper Entries at Date of Acquisition
LO 2
On January 1, 2020, Porter Company purchased an 80% interest in
Salem Company for $260,000. On this date, Salem Company had common
stock of $207,000 and retained earnings of $130,500.
An examination of Salem Company’s balance sheet revealed the
following comparisons between book and fair values:
Book Value
Fair Value
Inventory
$ 30,000
$ 35,000
Other current assets
50,000
55,000
Equipment
300,000
350,000
Land
200,000
200,000...
Exercise 4-8 On May 1, 2015, Peters Company purchased 80% of the common stock of Smith...
Exercise 4-8
On May 1, 2015, Peters Company purchased 80% of the common stock of
Smith Company for $53,100. Additional data concerning these two
companies for the years 2015 and 2016 are:
2015
2016
Peters
Smith
Peters
Smith
Common stock
$103,300
$27,200
$103,300
$27,200
Other contributed capital
38,900
9,000
38,900
9,000
Retained earnings, 1/1
72,100
10,100
115,800
53,000
Net income (loss)
58,300
44,700
39,400
(5,300
)
Cash dividends (11/30)
14,600
1,800
4,700
—0—
Any difference between book value and the...
Exercise 4-8 On May 1, 2015, Peters Company purchased 80% of the common stock of Smith...
Exercise 4-8
On May 1, 2015, Peters Company purchased 80% of the common stock of
Smith Company for $53,100. Additional data concerning these two
companies for the years 2015 and 2016 are:
2015
2016
Peters
Smith
Peters
Smith
Common stock
$103,300
$27,200
$103,300
$27,200
Other contributed capital
38,900
9,000
38,900
9,000
Retained earnings, 1/1
72,100
10,100
115,800
53,000
Net income (loss)
58,300
44,700
39,400
(5,300
)
Cash dividends (11/30)
14,600
1,800
4,700
—0—
Any difference between book value and the...
CP4-2 Analyzing and Recording Adjusting Journal Entries [LO 4-1, LO 4-2] [The following information applies to...
CP4-2 Analyzing and Recording Adjusting Journal Entries [LO 4-1,
LO 4-2]
[The following information applies to the questions
displayed below.]
Jordan Company’s annual accounting year ends on December 31. It
is now December 31, 2015, and all of the 2015 entries have been
made except for the following:
a.
The company owes interest of $680 on a bank loan. The interest
will be paid when the loan is repaid on September 30, 2016. No
interest has been recorded.
b.
On...
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