E17 7 On Tiger Company provided you with the following

# E17 7 on tiger company provided you with the following

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Doran Chan Spring I '06 AMA202.0035 Prof. Angela Wu 1 of 1 6/6/2006 E17-13Parent Co. invested \$1,000,000 in Sub Co. for 25% of its outstanding stock. At the time of the purchase, Sub Co. had a book value of \$3,200,000. Sub Co. pays out %40 of net income in dividends each year. InstructionsUse the information in the following T-account for the investment in Sub to anser the following question. 1,000,000110,00044,000(a) How much was Parent Co.'s share of Sub Co.'s net income for the year?(b) How much was Parent Co.'s share of Sub Co.'s dividends for the year?(c) What was Sub Co.'s total net income for the year?(d) What was Sub Co.'s total dividends for the year? Investment in Sub Co. (a) \$110,000 increase in the investment for the year. (b) \$44,000 share of dividends for the year.(c) \$110,000 ÷ 25% = 440,000 is the total net income for the year.(d) \$440,000 x 40% = 176,000 is the total dividends for the year.
Doran Chan Spring I '06 AMA202.0035 Prof. Angela Wu 1 of 1 6/6/2006 E13-2The following are selected 2004 transactions of Sean Astin Corporation.Sept. 1 Purchased inventory from Encino Company on account for \$50,000. Astin records purchases gross and uses periodic inventory system.Oct. 1 Issued a \$50,000, 12-month, 12% note to Encino in payment of account.Oct. 1 Borrowed \$50,000 from the Shore Bank by signing a 12-month, noninterest-bearing \$56,000 note.Instructions(a) Prepare journal entries for the selected transactions above.(b) Prepare adjusting entries at December 31.(c) Compute the total net liability to be reported on the December 31 balance sheet for:(1) the interest-bearing note.(2) the non-interest-bearing note.

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