E10-1A

Percy Company purchased 80% of the outstanding voting shares of Song Company at the beginning of 2014 for $387,000. At the
time of purchase, Song Company's total stockholders' equity amounted to $475,000. Income and dividend distributions for Song
Company from 2014 through 2016 are as shown below. Assume that there were no retained earnings on the date of acquisition.

Net Income Dividends Cummulative

(loss) Distributed Retained Earnings
2014 63,500 25,000 38,500
2015 52,500 50,000 42,500
2016 (55,000) 35,000

Required:
Prepare journal entries on the books of Percy Company from the date of purchase through 2016 to account for its investment in
Song Company under each of the following assumptions: Cost Method

A.  Percy Company uses the cost method to record its investment.

Investment In S
(1) 2014: Record Initial Purchase of Song Company Stock 2014 Beg. Balance 0
Investment in S 387,000 Purchase 387,000
Cash 387,000

(2) 2014: Record Dividends Received from Song Company

Cash 20,000
Dividend Income 20,000

(3) 2015: Record Dividends Received from Song Company 2014 End. Balance 387,000
Cash 40,000
Dividend Income 40,000

(4) 2016: Record Liquidating Dividends Received from Song Company 2015 End. Balance 387,000
Cash 28,000 28,000
Investment in S 28,000

2016 End. Balance 359,000

E10-1B
Percy Company purchased 80% of the outstanding voting shares of Song Company at the beginning of 2014 for $387,000. At the
time of purchase, Song Company's total stockholders' equity amounted to $475,000. Income and dividend distributions for Song
Company from 2014 through 2016 are as shown below. Assume that there were no retained earnings on the date of acquisition.

Dividends
Net Income (loss) Distributed
2014 63,500 25,000
2015 52,500 50,000
2016 (55,000) 35,000

Required:
Prepare journal entries on the books of Percy Company from the date of purchase through 2016 to account for its investment in
Song Company under each of the following assumptions: Partial-Equity Method

B.  Percy Company uses the partial equity method to record its investment.

Investment In S
(1) 2014: Record Initial Purchase of Song Company Stock 2014 Beg. Balance 0
Investment in S 387,000 Purchase 387,000
Cash 387,000

(2) 2014: Record Dividends Received from Song Company

Cash 20,000
Investment in S 20,000 20,000 Dividend

(3) 2014: Record Parent Share of Song's Income

Investment in S 50,800 Income 50,800
Equity in S Income 50,800

(4) 2015: Record Dividends Received from Song Company 2014 End. Balance 417,800
Cash 40,000
Investment in S 40,000 40,000 Dividend

(5) 2015: Record Parent Share of Song's Income

Investment in S 42,000 Income 42,000
Equity in S Income 42,000

(6) 2016: Record Dividends Received from Song Company 2015 End. Balance 419,800
Cash 28,000 28,000 Dividend
Investment in S 28,000

(7) 2016: Record Parent Share of Song's Income

Equity in S Loss 44,000
Investment in S 44,000 44,000 Loss

2016 End. Balance 347,800

E10-1C
Percy Company purchased 80% of the outstanding voting shares of Song Company at the beginning of 2014 for $387,000. At the
time of purchase, Song Company's total stockholders' equity amounted to $475,000. Income and dividend distributions for Song
Company from 2014 through 2016 are as shown below. Assume that there were no retained earnings on the date of acquisition.

Dividends
Net Income (loss) Distributed
2014 63,500 25,000
2015 52,500 50,000
2016 (55,000) 35,000

Required:
Prepare journal entries on the books of Percy Company from the date of purchase through 2016 to account for its investment in
Song Company under each of the following assumptions: Complete Equity Method

C. Percy Company uses the complete equity method to record its investment. The difference between book value of equity
acquired and the value implied by the purchase price was attributed solely to an excess of market over book values of
depreciable assets, with a remaining life of 10 years.

Parent Noncontrolling
80% 20% Total Value
Purchase price and implied value 387,000 96,750 483,750
Less: Book value of subsidiary equity
Equity 380,000 95,000 475,000
Total book value 380,000 95,000 475,000
Difference btwn implied and book 7,000 1,750 8,750
Less: Allocation to Depreciable Asset 7,000 1,750 8,750
Remaining Difference - - -
 Investment In S
(1) 2014: Record Initial Purchase of Song Company Stock 2014 Beg. Balance 0
Investment in S 387,000 Purchase 387,000
Cash 387,000

(2) 2014: Record Dividends Received from Song Company

Cash 20,000
Investment in S 20,000 20,000 Dividend

(3) 2014: Record Parent Share of Song's Income

Investment in S 50,800 Income 50,800
Equity in S Income 50,800

(4) 2014: Record Additional Depreciation on Assets of Song Company

Equity in S Income 700
Investment in S 700 700 Additional Depreciation

(5) 2015: Record Dividends Received from Song Company 2014 End. Balance 417,100
Cash 40,000
Investment in S 40,000 40,000 Dividend

(6) 2015: Record Parent Share of Song's Income

Investment in S 42,000 Income 42,000
Equity in S Income 42,000

(7) 2015: Record Additional Depreciation on Assets of Song Company

Equity in S Income 700
Investment in S 700 700 Additional Depreciation

(8) 2016: Record Liquidating Dividends Received from Song Company 2015 End. Balance 418,400
Cash 28,000 28,000 Dividend
Investment in S 28,000

(9) 2016: Record Parent Share of Song's Income

Equity in S Loss 44,000
Investment in S 44,000 44,000 Loss

(10) 2016: Record Additional Depreciation on Assets of Song Company

Equity in S Income 700
Investment in S 700 700 Additional Depreciation

2016 End. Balance 345,700