On January 1, 20X1, Company P Purchased a 90% Interest

question 22

Essay

On January 1, 20X1, Company P purchased a 90% interest in Company S for $360,000. Company P prepared the following determination and distribution of excess schedule at that time:
Company S had income of $30,000 for 20X1 and $40,000 for 20X2. No dividends were paid. Company P sold its entire investment in Company S on January 1, 20X3, for $340,000.
Required:
Prepare Company P's entries to record the sale assuming that Company P used the
a.simple equity method to reflect its investment in Company S.
b.cost method to reflect its investment in Company S.

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Definitions:

Vestibulocochlear Nerve

A cranial nerve that transmits sound and equilibrium (balance) information from the inner ear to the brain.

Merkel Disks

Specialized skin cells that function as mechanoreceptors, responding to light touch and pressure.

Mechanoreceptors

Sensory receptors that respond to mechanical pressure or distortion.

EEG

Electroencephalogram, a test that measures and records the electrical activity of the brain.