Question

Please, i need Unique answer, Use your own words (don't copy and paste).

*Please, don't use handwriting.

Q3. SALMAN Company acquires 60 percent of HAMAD Company’s common stock for $200,000 at the beginning of the year and gains significant influence over HAMAD. During the year, HAMAD has net income of $40,000 and pays dividends of $30,000.

Required: prepare the journal entries in books of SALMAN company under the Equity and Cost Method

Q5. How are direct combination costs, contingent consideration, and a bargain purchase reflected in recording an acquisition transaction?

Answer 1

Answer of question no 4 Journal Entries in the books of John Company
Cost Method of Accounting
Particulars	Amount in $
	Debit	Credit
Investment in David Company A/c Dr	200000
To Bank A/c		200000
(Being investment made in David Company's stock 60%)
Bank A/c Dr	30000
To Dividend Income A/c		30000
(Being dividend income received)

Equity Method of Accounting
Particulars	Amount in $
	Debit	Credit
Investment in David Company A/c Dr	200000
To Bank A/c		200000
(Being investment made in David Company's stock 60%)
Investment in David Company A/c Dr	24000
To Income from Investment in David Company A/c		24000
(Being income from gain in David's Company 60% of $40,000)
Bank A/c Dr	30000
To Investment in David Company A/c		30000
(Being dividend income treated as return on investment and therefore reduced the value of investments