KA Nitro Corporation purchased an 80% interest in Mars Company on January 1, 20X5, The following...

 

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KA Nitro Corporation purchased an 80% interest in Mars Company on January 1, 20X5, The following determination and distribution of excess schedule was prepared on the purchase date: Price paid for investment in Mars Less book value of interest purchased: Common stock Paid in capital in excess of par Retained earnings Total stockholder's equity Ownership interest Excess of cost over book Adjustments: Equipment (80%x$20,000) (8-year amortization, $2,000 per year) Dr. Goodwill Total adjustments Income Dividends Event 20X5 To record investment in Mars Company Subsidiary income of $45,000 reported to parent Dividends of $12,000 paid by Mars 20X6 Subsidiary income of $52,000 reported to parent Income and dividends for Mars Company dur20X5 and 20X6 were as follows: 20X6 $52,000 18,000 Investment in Mars Company Cash Investment in Mars Company Subsidiary income $24,000 41,600 93,400 $159,000 Cash Investment in Mars Company 80% Instructions: 1.Complete the following entries on the books of Mars Company under each of the methods indicated. Investment in Mars Company Subsidiary income $160,000 20X5 $45,000 12,000 127,200 $32.800 $16,000 16.000 Dr. $32.800 (A) (B) Sophisticated Simple Equity Method Equity Method (C) Cost Method KA Nitro Corporation purchased an 80% interest in Mars Company on January 1, 20X5, The following determination and distribution of excess schedule was prepared on the purchase date: Price paid for investment in Mars Less book value of interest purchased: Common stock Paid in capital in excess of par Retained earnings Total stockholder's equity Ownership interest Excess of cost over book Adjustments: Equipment (80%x$20,000) (8-year amortization, $2,000 per year) Dr. Goodwill Total adjustments Income Dividends Event 20X5 To record investment in Mars Company Subsidiary income of $45,000 reported to parent Dividends of $12,000 paid by Mars 20X6 Subsidiary income of $52,000 reported to parent Income and dividends for Mars Company dur20X5 and 20X6 were as follows: 20X6 $52,000 18,000 Investment in Mars Company Cash Investment in Mars Company Subsidiary income $24,000 41,600 93,400 $159,000 Cash Investment in Mars Company 80% Instructions: 1.Complete the following entries on the books of Mars Company under each of the methods indicated. Investment in Mars Company Subsidiary income $160,000 20X5 $45,000 12,000 127,200 $32.800 $16,000 16.000 Dr. $32.800 (A) (B) Sophisticated Simple Equity Method Equity Method (C) Cost Method

Answer rating: 100% (QA)

SOLUTION A Simple Equity Method 20X5 To record investment in Mars Company Investment in Mars Company 127200 Cash 127200 Subsidiary income of 45000 reported to parent Investment in Mars Company 45000 S... View the full answer