Advanced Accounting

EXERCISE 4-1 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: 2019 2020 2021 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 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