54-1 Parent Company Entries, Liquidating Dividend LO 2 Percy Company purchased 80% of the outstanding voting shares of Song Company at the beginning of 2019 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 2019 through 2021 are as follows: Net income (loss) Dividend distribution 2019 $63,500 25,000 2020 $52,500 50,000 2021 ($55,000) 35,000 Required: Prepare journal entries on the books of Percy Company from the date of purchase through 2021 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 4-2 Workpaper Eliminating Entries, Cost Method LO 5 Park Company purchased 90% of the stock of Salt Company on January 1, 2019, for $465,000, an amount equal to $15,000 in excess of the book value of equity acquired. This excess payment relates to an undervaluation of Salt Company's land. On the date of purchase, Salt Company's retained earnings balance was $50,000. The remainder of the stockholders' equity consists of no-par common stock. During 2023, Salt Company declared dividends in the amount of $10,000, and reported net income of $40,000. The retained earnings balance of Salt Company on December 31, 2022, was $160,000. Park Company uses the cost method to record its investment. Required: Prepare in general journal form the workpaper entries that would be made in the preparation of a consolidated statements workpaper on December 31, 2023. ECISE 4-11 Allocation of Difference between Book Value and the Value Implied by the Purchase Price, Parent Company Entries, Three Methods LO 2 LO 4 LOS On January 1, 2022, Plutonium Corporation acquired 80% of the outstanding stock of Sulfurst Inc. for $268,000 cash. The following balance sheet shows Sulfurst Inc.'s book values immediately prior to acquisition, as well as the appraised values of its assets and liabilities by Plutonium's experts. EX Sulfurst Inc.'s Market Volar $ 90,000 Sulfurst Inc.'s Book Values Current assets $ 90,000 Property, plant & equipment: Land Building & machinery (net) Total assets Total liabilities Common stock, $5 par value Additional paid-in-capital Retained earnings Total liabilities and equities $340,000 100,000 170,000 80,000 170,000 $340,000 $100,000 100,000 20,000 120,000 $100,000 Required: A. Prepare a Computation and Allocation Schedule for the Difference between Book Value and the Value Implied by the Purchase Price.de B. Prepare the entry to be made on the books of Plutonium Corporation to record its investment in Sulfurst Inc. Assume that during the first two years after acquisition of Sulfurst Inc., Sulfurst reports the bled following changes in its retained earnings: Retained earnings, January 1, 2022 Net income, 2022 Less: dividends, 2022 Net income, 2023 Less: dividends, 2023 Retained earnings, December 31, 2023 $120,000 40,000 (24,000) 45,000 (21,600 $159,400 C. Prepare journal entries under each of the following methods to record the information above on the books of Plutonium Corporation for the years 2022 and 2023, assuming that all depreciable assets have a remaining life of 20 years. (1) Plutonium uses the cost method to account for its investment in Sulfurst. (2) Plutonium uses the partial equity method to account for its investment in Sulfurst, (3) Plutonium uses the complete equity method to account for its investment in Sulfurst. Suhsidiary In ASK 4.12