Parent Company Entries, Three Methods OnJ anuary 1, 2000, 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 $4,972,000 was paid in cash. At the purchase date, the balance sheet of Singer Company included the following: LO6 Current Assets $2,926,550 Long-Term Assets 3,894,530 Other Assets 759,690 Current Liabilities 1,557,542 Common Stock, $20 par value 2,000,000 Other Contributed Capital 1,891,400 Retained Earnings 1,621,000 Additional data on Singer Company for the four years following the purchase are:
2000 2001 2002 2003 Net income (loss) $1,997,800 $476,000 $(179,600) $(323,800)
Cash dividends paid, 12/30 500,000 500,000 500,000 500,000 Required:
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.)
A. Perelli uses the cost method to account for its investment in Singer.
B. Perelli uses the partial equity method to account for its investment in Singer.
C. Perelli uses the complete equity method to account for its investment in Singer.