Elizabeth Company purchased stock in Taylor Company for $500,000. In the current year, Taylor Company had a net income of $48,000 and paid a dividend of $32,000. At the end of the year, the market value of Taylor Company is $525,000.
Required:
1. Assume that Elizabeth Company owns 10% of the shares of Taylor Company. Show the effects of these transactions on the accounts of Elizabeth Company using the balance sheet equation.
2. Assume that Elizabeth Company owns 25% of the shares of Taylor Company. Show the effect of these transactions on the accounts of Elizabeth Company using the balance sheet equation.

Question

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The Answer of Elizabeth Company purchased stock in Taylor Company for $500,000. In the current year, Taylor Company had a net income of $48,000 and paid a dividend of $32,000. At the end of the year, the market value of Taylor Company is $525,000.
Required:
1. Assume that Elizabeth Company owns 10% of the shares of Taylor Company. Show the effects of these transactions on the accounts of Elizabeth Company using the balance sheet equation.
2. Assume that Elizabeth Company owns 25% of the shares of Taylor Company. Show the effect of these transactions on the accounts of Elizabeth Company using the balance sheet equation.

Elizabeth Company Purchased Stock in Taylor Company for $500,000