competition Company purchases all of the stock of Piano Corp. for $4,500 on January 1st. The reported
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Question:
competition Company purchases all of the stock of Piano Corp. for $4,500 on January 1st. The reported book values of Piano's net assets equal their fair values. Piano's balance sheet on the date of purchase is as follows:
Accounts receivable | $450 | Mortgage payable | $450 |
Inventories | 900 | ||
Building | 3,600 | Stockholders' equity | 4,500 |
Total assets | $4,950 | Total liabilities and equity | $4,950 |
During the year, Piano reports net income of $900 and pays $270 in dividends to Competition.
Required
a. Provide the following journal entries on Competition's books: 1. Record the recognition of Equity Income. 2. Record the receipt of dividends from Piano.
Debit | Credit | ||
---|---|---|---|
1. | Equity Income | 900 | |
Equity Investment | 900 | ||
(To record equity income.) | |||
2. | Cash | 270 | |
Equity Investment | 270 | ||
(To record the receipt of dividends.) |
b. At what amount is the Equity Investment reported on Competition's balance sheet on December 31?
Related Book For
Advanced Accounting
ISBN: 978-1934319307
2nd edition
Authors: Susan S. Hamlen, Ronald J. Huefner, James A. Largay III
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