Parent Company Entries, Liquidating Dividend Percy Company purchased 80% of the outstanding voting shares of Song Company at the beginning of 2002 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 2002 through 2004 are as follows: LO6 2002 2003 2004 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 2004 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 cost and the book value of equity acquired was attributed solely to an excess of market over book values of depreciable assets, with a remaining life of 10 years.