On January 1, 2009, Pert Company purchased 85% of the outstanding common stock of Sales Company for $350,000. On that date, Sales Company's stockholders' equity consisted of com- mon stock, $100,000; other contributed capital, $40,000; and retained earnings, $140,000. Pert Company paid more than the book value of net assets acquired because the recorded cost of Sales Company's land was significantly less than its fair value. During 2009 Sales Company earned $148,000 and declared and paid a $50,000 dividend. Pert Company used the partial equity method to record its investment in Sales Company. Part 1 Required: A. Prepare the investment-related entries on Pert Company's books for 2009. B. Prepare the workpaper eliminating entries for a workpaper on December 31, 2009. Part 2 : assume that during 2010 Sales Company earned $190,000 and declared and paid a $50,000 dividend. Required: C. Prepare the investment-related entries on Pert Company's books for 2010. D. Prepare the workpaper eliminating entries for a workpaper on December 31, 2010.

On January 1, 2009, Pert Company purchased 85% of the outstanding common stock of Sales Company for $350,000. On that date, Sales Company's stockholders' equity consisted of com- mon stock, $100,000; other contributed capital, $40,000; and retained earnings, $140,000. Pert Company paid more than the book value of net assets acquired because the recorded cost of Sales Company's land was significantly less than its fair value. During 2009 Sales Company earned $148,000 and declared and paid a $50,000 dividend. Pert Company used the partial equity method to record its investment in Sales Company. Part 1 Required: A. Prepare the investment-related entries on Pert Company's books for 2009. B. Prepare the workpaper eliminating entries for a workpaper on December 31, 2009. Part 2 : assume that during 2010 Sales Company earned $190,000 and declared and paid a $50,000 dividend. Required: C. Prepare the investment-related entries on Pert Company's books for 2010. D. Prepare the workpaper eliminating entries for a workpaper on December 31, 2010.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Pit Coporation owns 75% of Stop Company's outstanding common stock. On 01/01/21, Pit sold sold a used piece of equipment to Stop in exchange for $236,000 cash. Pit's original cost of the equipment was $728,000 and accumulated depreciaiton of 01/01/21 was $447,000. The remaining useful life of the equipment is 10 years, and Stop will use that same usefull life. Both companies use the straight line method of depreciation. The Consolidation Entry would include:
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