Homework Answers
| Journal Entries in the books of investor (using equity method) | |||
| Ref. | Particulars | Debit | Credit |
| a. | Equity Investment | 187200 | |
| To cash | 187200 | ||
| b. | Equity investent | 36000 | |
| To equity income | 36000 | ||
| ( Share of net income of investee increases the value of investment) | |||
| c. | Cash | 21600 | |
| To equty investment | 21600 | ||
| (The receipt of dividend from investee decreases the value of investment) | |||
| d. | Cash | 219900 | |
| To equity investment | 201600 | ||
| To profit on sale | 18300 | ||
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Consolidation at date of acquisition (purchase price
greater than book value, acquisition journal entries
Assume that the parent company acquires its subsidiary by
exchanging 84,000 shares of its $2 par value Common Stock, with a
fair value on the acquisition date of $44 per share, for all of the
outstanding voting shares of the investee. In its analysis of the
investee company, the parent values all of the subsidiary’s assets
and liabilities at an amount equaling their book values except...
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