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Mike Ltd purchased the outstanding voting shares of Sam Ltd at the beginning of 2009 for $387,000. At the time of purchase, Sam's total stockholders' equity amounted to $475,000. Income and dividend distributions for Sam from 2009 through 2011 are as follows: 2009 2010 2011 Net income(loss) $63,500 $52,500 $(55,000) Dividend distribution $25,000 $50,000 $35,000 Required: Prepare journal entries for Mike Ltd. from the date of purchase through 2011 to account for its in vestment in Sam Ltd under each of the following assu mptions: 1. Cost Method (assume 20% investment) 2. Equity Method (assume 40% investment)

Mike Ltd purchased the outstanding voting shares of Sam Ltd at the beginning of 2009 for $387,000. At the time of purchase, Sam's total stockholders' equity amounted to $475,000. Income and dividend distributions for Sam from 2009 through 2011 are as follows: 2009 2010 2011 Net income(loss) $63,500 $52,500 $(55,000) Dividend distribution $25,000 $50,000 $35,000 Required: Prepare journal entries for Mike Ltd. from the date of purchase through 2011 to account for its in vestment in Sam Ltd under each of the following assu mptions: 1. Cost Method (assume 20% investment) 2. Equity Method (assume 40% investment)

FINANCIAL ACCOUNTING
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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Mike Ltd purchased the outstanding voting shares of Sam Ltd at the beginning of 2009 for $387,000. At the time of purchase, Sam's total stockholders' equity amounted to $475,000. Income and dividend distributions for Sam from 2009 through 2011 are as follows: 2009 2010 2011 Net income(loss) $63,500 $52,500 $(55,000) Dividend distribution $25,000 $50,000 $35,000 Required: Prepare journal entries for Mike Ltd. from the date of purchase through 2011 to account for its in vestment in Sam Ltd under each of the following assu mptions: 1. Cost Method (assu me 20% investment) 2. Equity Method (assume 40% investment)
Transcribed Image Text:Mike Ltd purchased the outstanding voting shares of Sam Ltd at the beginning of 2009 for $387,000. At the time of purchase, Sam's total stockholders' equity amounted to $475,000. Income and dividend distributions for Sam from 2009 through 2011 are as follows: 2009 2010 2011 Net income(loss) $63,500 $52,500 $(55,000) Dividend distribution $25,000 $50,000 $35,000 Required: Prepare journal entries for Mike Ltd. from the date of purchase through 2011 to account for its in vestment in Sam Ltd under each of the following assu mptions: 1. Cost Method (assu me 20% investment) 2. Equity Method (assume 40% investment)
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