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Palmer Company purchased 90% of the outstanding common stock of Stevens Company on January 1, 2014 for $1,000,000. During the next three years, Salem had the following income and dividends paid: Year Dividends Income $10,000 2014 $0 2015 $11,000 $0 2016 $45,000 $35,000 Prepare the journal entries made under both methods and then compute the ending balance in the "investment" account under both methods. Cost Method Account DR CR Account Equity Method DR CR

Palmer Company purchased 90% of the outstanding common stock of Stevens Company on January 1, 2014 for $1,000,000. During the next three years, Salem had the following income and dividends paid: Year Dividends Income $10,000 2014 $0 2015 $11,000 $0 2016 $45,000 $35,000 Prepare the journal entries made under both methods and then compute the ending balance in the "investment" account under both methods. Cost Method Account DR CR Account Equity Method DR CR

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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Palmer Company purchased 90% of the outstanding common stock of Stevens Company on January 1, 2014 for $1,000,000. During the next three years, Salem had the following income and dividends paid: Year Income Dividends 2014 2015 2016 $10,000 $11,000 $45,000 Prepare the journal entries made under both methods and then compute the ending balance in the "investment" account under both methods. Cost Method Account Investment Account balance DR $0 $0 $35,000 CR Account Equity Method Investment Account balance DR CR
Transcribed Image Text:Palmer Company purchased 90% of the outstanding common stock of Stevens Company on January 1, 2014 for $1,000,000. During the next three years, Salem had the following income and dividends paid: Year Income Dividends 2014 2015 2016 $10,000 $11,000 $45,000 Prepare the journal entries made under both methods and then compute the ending balance in the "investment" account under both methods. Cost Method Account Investment Account balance DR $0 $0 $35,000 CR Account Equity Method Investment Account balance DR CR
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