Reference no: EM132715106

Question: Percy Company purchased 80% of the outstanding voting shares of Song Company at the beginning of 2014 for $405,800. At the time of purchase, Song Company's total stockholders' equity amounted to $466,400. Income and dividend distributions for Song Company from 2014 through 2016 are as follows:

                                           2014               2015               2016

Net Income (loss)                $62,300          $51,900          ($57,200)

Dividend distribution              24,700            50,600             35,900

Prepare journal entries on the books of Percy Company from the date of purchase through 2016 to account for its investment in Song Company under each of the following assumptions:

(a) Percy Company uses the cost method to record its investment.