| Problem 4-1 On January 1, 2011, Perelli Company purchased 90,000 of the 100,000 outstanding shares of common stock of Singer Company as a long-term investment. The purchase price of $4,939,800 was paid in cash. At the purchase date, the balance sheet of Singer Company included the following: | Current assets | | $2,919,200 | | Long-term assets | | 3,916,300 | | Other assets | | 752,600 | | Current liabilities | | 1,566,700 | | Common stock, $20 par value | | 2,001,200 | | Other contributed capital | | 1,862,300 | | Retained earnings | | 1,611,800 | Additional data on Singer Company for the four years following the purchase are: | | | 2011 | | 2012 | | 2013 | | 2014 | | Net income (loss) | | $1,985,500 | | $478,200 | | ($178,200 | ) | | ($323,400 | ) | | Cash dividends paid, 12/30 | | 496,700 | | 496,700 | | 496,700 | | | 496,700 | | Prepare journal entries under each of the following methods to record the purchase and all investment-related subsequent events on the books of Perelli Company for the four years, assuming that any excess of purchase price over equity acquired was attributable solely to an excess of market over book values of depreciable assets (with a remaining life of 15 years). (Assume straight-line depreciation.) | | | |
| | (a) | | Your answer is partially correct. Try again. | | | | Perelli uses the cost method to account for its investment in Singer. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) | Date | Account Titles and Explanation | Debit | Credit | | 2011 | | | | | | | | | | | (To record the investment) | | | | | | | | | | | | | | | (To record dividend income) | | | | 2012 | | | | | | | | | | 2013 | | | | | | | | | | 2014 | | | | | | | | | | | | | | | | |
Problem 4-1 On January 1, 2011, Perelli Company purchased 90,000 of the 100,000 outstanding shares of common stock of Singer Company as a long-term investment. The purchase price of $4,939,800 was paid in cash. At the purchase date, the balance sheet of Singer Company included the following: Current assets $2,919,200 Long-term assets 3,916,300 Other assets 752,600 Current liabilities 1,566,700 Common stock, $20 par value 2,001,200 Other contributed capital 1,862,300 Retained earnings 1,611,800 Additional data on Singer Company for the four years following the purchase are: Net income (loss) Cash dividends paid, 12/30 2011 2012 $1,985,500 $478,200 496,700 496,700 2013 2014 ($178,200 ) ($323,400 ) 496,700 496,700 Prepare journal entries under each of the following methods to record the purchase and all investment-related subsequent events on the books of Perelli Company for the four years, assuming that any excess of purchase price over equity acquired was attributable solely to an excess of market over book values of depreciable assets (with a remaining life of 15 years). (Assume straight-line depreciation.) (a) Your answer is partially correct. Try again. Perelli uses the cost method to account for its investment in Singer. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Date Account Titles and Explanation Debit Credit 2011 Investment in Subsidiary x Cash (To record the investment) X Cash Dividend Income (To record dividend income) X 2012 TCash Dividend Income X 2013 Cash Investment in Subsidiary X 2014 X X x
