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Company P acquired 100% of Company S on July 1, 2021 for $590,000. The purchase price was $300,000 in excess of Ss $290,000 book value

Company P acquired 100% of Company S on July 1, 2021 for $590,000. The purchase price was $300,000 in excess of Ss $290,000 book value of Stockholders Equity on the acquisition date, and all of the excess was allocated to a patent with a useful life of ten years. Company S reported net income of $25,000 for 2021, reported a net loss of $10,000 in 2022, and reported net income of $35,000 in 2023. Company S paid dividends of $5,000 in 2022 and $12,000 in 2023.

  1. Assume Company P uses the initial value method to account for its investment in S. What consolidating entry would be necessary to adjust Ps retained earnings balance if we were preparing consolidated financial statements as of 12/31/23?
  2. Assume Company P uses the partial equity method to account for its investment in S. What consolidating entry would be necessary to adjust Ps retained earnings balance if we were preparing consolidated financial statements as of 12/31/23?

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