Problem 4-1 On January 1, 2011, Perelli Company purchased 90,000of the 100,000 outstanding shares of common stock of Singer Companyas a long-term investment. The purchase price of $4,974,200 waspaid in cash. At the purchase date, the balance sheet of SingerCompany included the following:
Current assets $2,909,500
Long-term assets 3,887,900
Other assets 756,100
Current liabilities 1,547,800
Common stock, $20 par value 1,996,500
Other contributed capital 1,900,500
Retained earnings 1,605,500
Additional data on Singer Company for the four years followingthe purchase are:
2011 2012 2013 2014
Net income (loss) $1,984,600 $480,200 ($178,200 ) ($324,300)
Cash dividends paid, 12/30 499,700 499,700 499,700499,700
Prepare journal entries under each of the following methods torecord the purchase and all investment-related subsequent events onthe books of Perelli Company for the four years, assuming that anyexcess of purchase price over equity acquired was attributablesolely to an excess of market over book values of depreciableassets (with a remaining life of 15 years). (Assume straight-linedepreciation.)
Perelli uses the complete equity method to account for itsinvestment in Singer. (Round answers to 0 decimal places, e.g.5,125. Credit account titles are automatically indented when amountis entered. Do not indent manually. If no entry is required, select"No Entry" for the account titles and enter 0 for the amounts.)
Date Account Titles and Explanation Debit Credit
2011 (To record the investment)
(To record dividend income)
(To record equity income (loss))
(To record amortization)
2012 (To record dividend income)
(To record equity income (loss))
(To record amortization)
2013 (To record dividend income)
(To record equity income (loss))
(To record amortization)
2014 (To record dividend income)
(To record equity income (loss))
(To record amortization)
