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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

Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 25E
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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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