Competition Company purchases all of the stock of Piano Corp. for $5,250 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 $525 Mortgage payable 1,050 4,200 Stockholders' equity 5,250 $5,775 Total liabilities and equity $5,775 Inventories Building Total assets During the year, Piano reports net income of $1,050 and pays $315 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. 1. 2. $525 (To record equity income.) (To record the receipt of dividends.) Debit Credit b. At what amount is the Equity Investment reported on Competition's balance sheet on December 31?

Competition Company purchases all of the stock of Piano Corp. for $5,250 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 $525 Mortgage payable 1,050 4,200 Stockholders' equity 5,250 $5,775 Total liabilities and equity $5,775 Inventories Building Total assets During the year, Piano reports net income of $1,050 and pays $315 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. 1. 2. $525 (To record equity income.) (To record the receipt of dividends.) Debit Credit b. At what amount is the Equity Investment reported on Competition's balance sheet on December 31?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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