Question

Problem 4-1 On January 1, 2011, Perelli Company purchased 90,000 of the 100,000 outstanding shares of common stock of Singer Company as a long-term investment. The purchase price of $4,974,200 was paid in cash. At the purchase date, the balance sheet of Singer Company included the following:

Current assets $2,909,500

Long-term assets 3,887,900

Other assets 756,100

Current liabilities 1,547,800

Common stock, $20 par value 1,996,500

Other contributed capital 1,900,500

Retained earnings 1,605,500

Additional data on Singer Company for the four years following the purchase are:

2011 2012 2013 2014

Net income (loss) $1,984,600 $480,200 ($178,200 ) ($324,300 )

Cash dividends paid, 12/30 499,700   499,700 499,700 499,700

Prepare journal entries under each of the following methods to record the purchase and all investment-related subsequent events on the books of Perelli Company for the four years, assuming that any excess of purchase price over equity acquired was attributable solely to an excess of market over book values of depreciable assets (with a remaining life of 15 years). (Assume straight-line depreciation.)

Perelli uses the complete equity method to account for its investment in Singer. (Round answers to 0 decimal places, e.g. 5,125. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date Account Titles and Explanation Debit Credit

2011 (To record the investment)

(To record dividend income)

(To record equity income (loss))

(To record amortization)

2012 (To record dividend income)

(To record equity income (loss))

(To record amortization)

2013 (To record dividend income)

(To record equity income (loss))

(To record amortization)

2014 (To record dividend income)

(To record equity income (loss))

(To record amortization)

Answer 1

Date	Account Titles and Explanation	Debit	Credit
2011	Investment in Singer Company	$   4,974,200
	Cash		$   4,974,200
	(To record the investment)
	Cash	$      449,730
	Investment in Singer Company ($499,700*.9)		$      449,730
	(To record dividend income)
	Investment in Singer Company	$   1,786,140
	Equity in Subsidiary - income ($1,984,600*.9)		$   1,786,140
	(To record equity income (loss))
	Equity in Subsidiary	$           1,463
	Investment in Singer Company ($21,950/15 yrs)		$           1,463
	(To record amortization)
2012	Cash	$      449,730
	Investment in Singer Company ($499,700*.9)		$      449,730
	(To record dividend income)
	Investment in Singer Company	$      432,180
	Equity in Subsidiary - income ($480,200*.9)		$      432,180
	(To record equity income (loss))
	Equity in Subsidiary	$           1,463
	Investment in Singer Company ($21,950/15 yrs)		$           1,463
	(To record amortization)
2013	Cash	$      449,730
	Investment in Singer Company ($499,700*.9)		$      449,730
	(To record dividend income)
	Equity in Subsidiary - Loss (($178,200)*.9)	$      160,380
	Investment in Singer Company		$      160,380
	(To record equity income (loss))
	Equity in Subsidiary	$           1,463
	Investment in Singer Company ($21,950/15 yrs)		$           1,463
	(To record amortization)
2013	Cash	$      449,730
	Investment in Singer Company ($499,700*.9)		$      449,730
	(To record dividend income)
	Equity in Subsidiary - Loss (($324,300)*.9)	$    (291,870)
	Investment in Singer Company		$    (291,870)
	(To record equity income (loss))
	Equity in Subsidiary	$           1,463
	Investment in Singer Company ($21,950/15 yrs)		$           1,463
	(To record amortization)

Note:- Excess of market value over book Value = $4,974,200 - 90% * ( $1,996,500 + $1,900,500 + $1,605,500) = $21,950

*** Please leave a comment in case of any doubt or query and i will get back to you. ***

Please hit like if this helps!