On January 1, 20X3, Company P purchased a 15% interest in Company S.On July 1, 20X6, Company P purchased an additional 20% interest in Company S.Both purchases were at a cost in excess of underlying book value.Company S paid dividends each December from 20X3 to 20X6.
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Required:
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a.How would Company P record its investment in Company S in its financial statements originally issued for 20X3 to 20X5?
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b.Does a 35% ownership interest absolutely require the use of the equity method?
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c.How will Company P account for its investment in Company S in its 20X6 financial statements?
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d.How will Company P account for its investment in Company S in the 20X3 to 20X6 comparative statements published in March 20X7?

Question

Quizplus · Accepted Answer

The Answer of On January 1, 20X3, Company P purchased a 15% interest in Company S.On July 1, 20X6, Company P purchased an additional 20% interest in Company S.Both purchases were at a cost in excess of underlying book value.Company S paid dividends each December from 20X3 to 20X6.
?
Required:
?
a.How would Company P record its investment in Company S in its financial statements originally issued for 20X3 to 20X5?
?
?
b.Does a 35% ownership interest absolutely require the use of the equity method?
?
?
c.How will Company P account for its investment in Company S in its 20X6 financial statements?
?
?
d.How will Company P account for its investment in Company S in the 20X3 to 20X6 comparative statements published in March 20X7?

On January 1, 20X3, Company P Purchased a 15% Interest