On 1/1/2020, Parsons Inc. purchased 25% of Suburban Inc. for $400,000. On that day Suburban had...

Transcribed Image Text:

On 1/1/2020, Parsons Inc. purchased 25% of Suburban Inc. for $400,000. On that day Suburban had common stock worth $120,000 total and Retained Earnings of $1,080,000. All of Suburban's assets and liabilities were fairly valued. In addition, Suburban Inc. reported the following information for 2020: 2020 Suburban Inc. Net income $140,000 Dividends paid $40,000 $1,720,000 Fair value on 12/31 (a) Present all required entries for the acquisition, income share, and dividends on Parsons' books for Suburban, assuming it uses the equity method to account for its investment in Suburban. (b) How would the journal entries differ if Parsons used the fair value method to account for its investment in Suburban? Assume that Parsons has a credit balance of $2,500 in the fair value adjustment account at the beginning of 2020. On 1/1/2020, Parsons Inc. purchased 25% of Suburban Inc. for $400,000. On that day Suburban had common stock worth $120,000 total and Retained Earnings of $1,080,000. All of Suburban's assets and liabilities were fairly valued. In addition, Suburban Inc. reported the following information for 2020: 2020 Suburban Inc. Net income $140,000 Dividends paid $40,000 $1,720,000 Fair value on 12/31 (a) Present all required entries for the acquisition, income share, and dividends on Parsons' books for Suburban, assuming it uses the equity method to account for its investment in Suburban. (b) How would the journal entries differ if Parsons used the fair value method to account for its investment in Suburban? Assume that Parsons has a credit balance of $2,500 in the fair value adjustment account at the beginning of 2020.

Answer rating: 100% (QA)

a Journal entries in books of Parson using equity method to account for its investment in Suburban D... View the full answer