On January 1, 2011, Artic Company acquires an 80% interest in Calco Company for $400,000. On the acquisition date, Calco Company has the following stockholders’ equity:
Common stock ($10 par) ......... $200,000
Paid-in capital in excess of par ....... 100,000
Retained earnings ............ 150,000
Total stockholders’ equity .......... $450,000
Assets and liabilities have fair values equal to book values. Goodwill totals $50,000. Calco Company has net income of $60,000 for 2011. No dividends are paid or declared during 2011.
On January 1, 2012, Calco Company sells 10,000 shares of common stock at $60 per share in a public offering.
Assuming the parent uses the simple equity method; prepare all parent company entries required for the issuance of the shares.
Assume the following alternative situations:
1. Artic Company purchases 8,000 shares.
2. Artic Company purchases 9,000 shares.
3. Artic Company purchases 5,000 shares.