1. Following are trial balances of P and S Company as of December 31, 200X.

(Prior to the payment of dividends and recording S income using the equity method of accounting).

P Company S Company

Cash $607,000 $ 73,000

Inventories 138,000 40,000

Other Assets 60,000

Investment in S 345,000

Plant Assets 330,000 160,000

Current Liabilities (120,000) (100,000)

Common Stock $5PV (100,000)

Common Stock $10 PV (40,000)

Additional Paid in Capital (200,000) (20,000)

Retained Earnings (620,000) (60,000)

Sales (860,000) (120,000)

Cost of Goods Sold 300,000 42,000

Operating expenses 120,000 25,000

Other information:

Differences between identifiable net assets of S Company on THE DATE OF THE ACQUISITION of S Company By P Company were:

Fair Value Book Value Difference

Plant 250,000 140,000 110,000 20 year life

On January 1, 200X P Co. purchased S Co. for $345,000. Goodwill created on date of purchase was $115,000.

On December 31, 200X S paid $20,000 in dividends.

1. Show journal entries for the payment of dividends by S and P