Question Three: (7 marks) (B1, C3)

Part A: (3 marks)

For the fiscal year ended March 31, 2020, X Company, the 80%-owned subsidiary of Y Corporation, had a net income of $600,000 and declared and paid dividends of $200,000. Fiscal Year 2020 depreciation and amortization of differences between current fair values and carrying amounts of Xs identifiable net assets was $30,000; and Fiscal Year 2020 impairment of goodwill recognized in the business combination was $1,000.

Instructions:

Prepare journal entries for Y Corporation to record the Fiscal Year 2020 operating results of X Company under the equity method.

Part B: (4 marks)

Included in the accounting records of the home office and the only branch, respectively, of Hamad Company were the following ledger accounts for June 2020:

	Investment in Ali Branch
Date		Explanation			Debit		Credit	Balance
	2020
	May 31	Balance						51,000 dr
	June 6	Shipment of merchandise			30,500			81,500 dr
	20	Receipt of cash					11,500	70,000 dr
	26	Collection of branch trade account receivable					9,000 1	61,000 dr
	30	Shipment of merchandise			24,000 2			85,000 dr
	Home Office
	Date		Explanation	Debit		Credit			Balance
	2020
	May 31		Balance						51,000 cr
	June 8		Receipt of merchandise			30,500			81,500 cr
	18		Payment of cash	11,500					70,000 cr
	27		Acquisition of office equipment	14,500 3					55,500 cr
	30		Payment of cash	22,000 4					33,500 cr

Instructions:

Prepare journal entries on June 30, 2020, for the (1) home office, and (2) Ali Branch of Hamad Company. The branch uses the perpetual inventory system.