Question
Company T had 32,000 outstanding shares of common stock, par value $10 per share. On January 1 of the current year, Company P purchased some
Company T had 32,000 outstanding shares of common stock, par value $10 per share. On January 1 of the current year, Company P purchased some of Company Ts shares as a long-term investment at $23 per share. At the end of the current year, Company T reported the following: income, $48,000, and cash dividends declared during the year, $19,500. The fair value of Company T stock at the end of the current year was $20 per share.
2-a. Prepare the journal entries for Company P at the dates indicated assuming 3,200 shares of Company T were purchased. Assume the investment will be held long term.
2-b. Prepare the journal entries for Company P at the dates indicated assuming 8,000 shares of Company T were purchased. Assume the investment will be held long term.
3-a. Complete the following schedule to show the separate amounts that should be reported on the current year's balance sheet of Company P:
3-b. Complete the following schedule to show the separate amounts that should be reported on the current year's income statement of Company P:
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