Nitro Corporation purchased an 80% interest in Mars Company on January 1, 20X5. The following determination and distribution of excess schedule was prepared on the purchase date: Price paid for investment in Mars $160,000 Less book value of interest purchased: Common stock $24,000 Paid in capital in excess of par 41,600 Retained earnings 93,400 Total stockholder’s equity $159,000 Ownership interest 80% 127,200 Excess of cost over book $32,800 Adjustments: Equipment (80%x$20,000) (8-year amortization, $2, 000 per year) $16,000 Dr. Goodwill 16,000 Dr. Total adjustments $32,800 Income and dividends for Mars Company dur20X5 and 20X6 were as follows: 20X5 20X6 Income $45,000 $52,000 Dividends 12,000 18,000 Instructions: 1. Complete the following entries on the books of Mars Company under each of the methods indicated. Event (A) Simple Equity Method (B) Sophisticated Equity Method (C) Cost Method 20X5 To record investment in Mars Company Investment in Mars Company Cash__________ Subsidiary income of $45,000 reported to parent Investment in Mars Company Subsidiary income________ Dividends of $12,000 paid by Mars Cash_____________ Investment in Mars Company 20X6 Subsidiary income of $52,000 reported to parent Investment in Mars Company Subsidiary income________ Dividends of $18,000 paid by Mars Cash_____________ Investment in Mars Company
Nitro Corporation purchased an 80% interest in Mars Company on January 1, 20X5. The following determination and distribution of excess schedule was prepared on the purchase date:
Price paid for investment in Mars $160,000
Less book value of interest purchased:
Common stock $24,000
Paid in capital in excess of par 41,600
Total
Ownership interest 80% 127,200
Excess of cost over book $32,800
Adjustments:
Equipment (80%x$20,000)
(8-year amortization, $2, 000 per year) $16,000 Dr.
Total adjustments $32,800
Income and dividends for Mars Company dur20X5 and 20X6 were as follows:
20X5 20X6
Income $45,000 $52,000
Dividends 12,000 18,000
Instructions:
1. Complete the following entries on the books of Mars Company under each of the methods indicated.
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Event |
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(A) Simple Equity Method |
(B) Sophisticated Equity Method |
(C) Cost Method |
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20X5 To record investment in Mars Company |
Investment in Mars Company Cash__________ |
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Subsidiary income of $45,000 reported to parent |
Investment in Mars Company Subsidiary income________ |
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Dividends of $12,000 paid by Mars |
Cash_____________ Investment in Mars Company |
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20X6 Subsidiary income of $52,000 reported to parent |
Investment in Mars Company Subsidiary income________ |
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Dividends of $18,000 paid by Mars |
Cash_____________ Investment in Mars Company |
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