Question
On January 1, 2012, Pay Corporation purchased 90% of Sal Company's stock for $118,000. During the next five years, Sal had the following income and
On January 1, 2012, Pay Corporation purchased 90% of Sal Company's stock for $118,000. During the next five years, Sal had the following income and dividends paid:
| Year | Income | Dividends |
| 2012 | $10,000 | 0 |
| 2013 | $10,000 | 0 |
| 2014 | $5,000 | 0 |
| 2015 | $5,000 | 0 |
| 2016 | $71,250 | 60,000 |
Required:
Prepare the book entries made under the COST METHOD and the EQUITY METHOD and then compute the ending balance in the "investment" account under both methods.
Step by Step Solution
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Step: 1
Under the cost method the investment is recorded at its original cost of 118000 and no adjustment is ...
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Advanced Accounting
Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng
11th edition
538480289, 978-0538480284
