Parent Company acquired 25% of Son Inc. on January 1, 20X5 for $420,000. Son rep

Question

Parent Company acquired 25% of Son Inc. on January 1, 20X5 for $420,000. Son reported earning of $82,000 and declared dividends of $4,000 during 20X5, Parent determined the fair value of its shares in Son to be $450,000 at December 31, 20X5.

Based on the preceding information prepare the journal entries for 20X5 Parent will make to account for its investment in Son, if Parent uses the cost method of accounting for this investment.

Based on the preceding information prepare the journal entries for 20X5 Parent will make to account for its investment in Son, if Parent uses the equity method of accounting for this investment.

Based on the preceding information prepare the journal entries for 20X5 Parent will make to account for its investment in Son, if Parent uses the fair value method of accounting for this investment.

Explanation / Answer

Solution a:

Solution b:

Solution c:

Journal Entries - Parent Company (Cost Method) Date Particulars Debit Credit 1/1/20X5 Investment in Son Inc. Dr $420,000.00             To Cash $420,000.00 (Being investment made in Son Inc.) 31/12/20X5 Cash Dr ($4,000*25%) $1,000.00             To Dividend Revenue $1,000.00 (Being dividend received from Son Inc.)

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.