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Big Co. made several purchases of Little Co stock over the years. Assume all of Littles assets and liabilities are fairly valued, so any differential would be attributed to goodwill (in other words, you dont have to worry about amortizing anything)

1/1/15 Bought 10% of stock for $100,000 (using cost method)

7/1/15 Bought 5% of stock for $60,000 (using cost method)

1/1/16 Bought 15% for $125,000 (switch to equity method)

1/1/18 Bought 30% for $600,000 (attain control)

1/1/19 Sold 50% for $800,000

Assume that Little has earnings of $100,000 per year, and pays dividends of $20,000 per year. Income is earned evenly throughout the year, and dividends are paid half in April and half in October.

Required: Prepare all entries on the books of Big related to this investment from 1/1/15 through 1/1/19.

Please show calculations to ALL entries.

01 Investment in Little 100,000 Cash 100,000 April dividend Cash 1,000 (Note 1) Investment income 1,000 Investment in Little Cash 60,000 60,000 October dividend Cash 1,500 (2) Investment income 1500 01 125,000 Investment in Little Cash 125,000 Investment in Little 10,000 (3) Retained earnings 10,000 April dividend Cash 3,000 (4) Investment in Little 3,000 October dividends Cash 3,000 Investment in Little 3,000 Earnings recognition Investment in Little 30,000 (5) Investment income 30,000

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