On January 2, 2011, Pasqual Corporation purchased 80% of the outstanding common stock and 30% of the
Question:
On January 2, 2011, Pasqual Corporation purchased 80% of the outstanding common stock and 30% of the outstanding cumulative, nonparticipating, preferred stock of Sung Company for $400,000 and $70,000, respectively. At this date, Sung Company reported account balances of $400,000 in common stock, $200,000 in preferred stock, and $100,000 in retained earnings. No other contributed capital accounts exist. The difference between implied and book value of the common stock is attributable to under- or overvalued land. Dividends on the 12% cumulative preferred stock (par $10) were not paid during 2010.
Other information:
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Required:
A. Prepare the journal entries made by Pasqual Corporation in 2011 to account for the in-vestments assuming
(1) The cost method is used,
(2) The partial equity method is used, and
(3) The complete equity method is used.
B. Compute the noncontrolling interest in Sung Company’s net income.
C. Prepare the 2011 workpaper entries related to the foregoing investments assuming
(1) The cost method is used to account for the investment,
(2) The partial equity method is used to account for the investment, and
(3) The complete equity method is used to account for theinvestment.
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
Step by Step Answer:
Part A Cost Method Investment in Sung Company Preferred Stock 70000 Investment in Sung Company Common Stock 400000 Cash 470000 Cash preferred stock 14400 Dividend Income 200000 x 12 x 30 7200 Investme...View the full answer
