EXERCISE 4-1 Parent Company Entries, Liquidating Dividend L02 Percy Company purchased 80% of the outstanding voting shares of Song Company at the be- ginning of 2009 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 2009 through 2011 are as follows: Net income (loss) Dividend distribution 2009 $63,500 25,000 2010 $52,500 50,000 2011 ($55,000) 35,000 Required: Prepare journal entries on the books of Percy Company from the date of purchase through 2011 to account for its investment in Song Company under each of the following assumptions: A. Percy Company uses the cost method to record its investment. B. Percy Company uses the partial equity method to record its investment. C. 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 re- maining life of 10 years.

EXERCISE 4-1 Parent Company Entries, Liquidating Dividend L02 Percy Company purchased 80% of the outstanding voting shares of Song Company at the be- ginning of 2009 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 2009 through 2011 are as follows: Net income (loss) Dividend distribution 2009 $63,500 25,000 2010 $52,500 50,000 2011 ($55,000) 35,000 Required: Prepare journal entries on the books of Percy Company from the date of purchase through 2011 to account for its investment in Song Company under each of the following assumptions: A. Percy Company uses the cost method to record its investment. B. Percy Company uses the partial equity method to record its investment. C. 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 re- maining life of 10 years.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter10: Stockholder's Equity

Section: Chapter Questions

Problem 92.4C

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