Roller Corporation purchased 100 percent ownership of Steam Company on January 1

Question

Roller Corporation purchased 100 percent ownership of Steam Company on January 1, 20X5, for $276,000. On that date, the book value of Steam’s reported net assets was $211,000. The excess over book value paid is attributable to depreciable assets with a remaining useful life of 5 years. Net income and dividend payments of Steam in the following periods were

Prepare journal entries on Roller Corporation’s books relating to its investment in Steam Company for each of the three years, assuming it accounts for the investment using the cost method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Prepare journal entries on Roller Corporation’s books relating to its investment in Steam Company for each of the three years, assuming it accounts for the investment using the equity-method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Roller Corporation purchased 100 percent ownership of Steam Company on January 1, 20X5, for $276,000. On that date, the book value of Steam’s reported net assets was $211,000. The excess over book value paid is attributable to depreciable assets with a remaining useful life of 5 years. Net income and dividend payments of Steam in the following periods were

Explanation / Answer

Cost Method 2015 Cash A/C dr. 13000 To InvestMent in Steam Company 13000 2016 Cash A/C dr. 23000 To InvestMent in Steam Company 23000 2017 Cash A/C dr. 42000 To InvestMent in Steam Company 42000 Equity Method 2015 InvestMent in Steam Company 24000 To Equity income in Steam Company 24000 Equity income in Steam Company 13000 To InvestMent in Steam Company 13000 Cash A/C dr. 13000 To InvestMent in Steam Company 13000 2016 InvestMent in Steam Company 44000 To Equity income in Steam Company 44000 Equity income in Steam Company 13000 To InvestMent in Steam Company 13000 Cash A/C dr. 23000 To InvestMent in Steam Company 23000 2017 InvestMent in Steam Company 24000 To Equity income in Steam Company 24000 Equity income in Steam Company 13000 To InvestMent in Steam Company 13000 Cash A/C dr. 42000 To InvestMent in Steam Company 42000

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