3) On January 1, 2009, 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 OMR 4,972,000 was paid in cash. At the purchase date the balance sheet of Singer company included the following: Particulars OMR 2,926.550 3,894,530 759,690 Current Liabilities 1,557,542 Common Stock OMR 20 Par value 2,000,000 Other Contributed Capital 1,891,400 Retained earnings 1,621,000 Additional data on Singer Company for the four years following the purchase are: 2009 2010 Current assets Long term assets Other assets 2011 2012 Net Income (Loss) 1,997,800 476,000-179,600-323,800 Cash dividends paid, 12/30 500,000 500,000 500,000 500,000 Required: 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) Perelli uses the cost method to account for its investment in Singer. B) Perelli uses the partial equity method to account for its investment in Singer.
3) On January 1, 2009, 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 OMR 4,972,000 was paid in cash. At the purchase date the balance sheet of Singer company included the following: Particulars OMR 2,926.550 3,894,530 759,690 Current Liabilities 1,557,542 Common Stock OMR 20 Par value 2,000,000 Other Contributed Capital 1,891,400 Retained earnings 1,621,000 Additional data on Singer Company for the four years following the purchase are: 2009 2010 Current assets Long term assets Other assets 2011 2012 Net Income (Loss) 1,997,800 476,000-179,600-323,800 Cash dividends paid, 12/30 500,000 500,000 500,000 500,000 Required: 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) Perelli uses the cost method to account for its investment in Singer. B) Perelli uses the partial equity method to account for its investment in Singer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:3) On January 1, 2009, 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
OMR 4,972,000 was paid in cash. At the purchase date the
balance sheet of Singer company included the following:
Particulars
OMR
2,926,550
3,894,530
759,690
Current assets
Long term assets
Other assets
Current Liabilities
1,557,542
Common Stock OMR 20 Par value 2,000,000
Other Contributed Capital
1,891,400
Retained earnings
1,621,000
Additional data on Singer Company for the four years
following the purchase are:
2009 2010
Net Income (Loss)
2011 2012
1,997,800 476,000-179,600-323,800
Cash dividends paid, 12/30 500,000 500,000 500,000 500,000
Required:
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) Perelli uses the cost method to account for its
investment in Singer.
B) Perelli uses the partial equity method to account for its
investment in Singer.
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