Padilla Company acquired 80% of the outstanding common stock of Skon Company on January 1, 2009, for

Question:

Padilla Company acquired 80% of the outstanding common stock of Skon Company on January 1, 2009, for $132,000. At the date of purchase, Skon Company had a balance in its $2 par value common stock account of $120,000 and retained earnings of $30,000.

On January 1, 2011, Skon Company issued 15,000 shares of its previously unissued stock to noncontrolling stockholders for $3.00 per share. On this date, Skon Company had a retained earnings balance of $50,500. The difference between implied and book values relates to subsidiary land. No dividends were paid in 2011. Skon Company reported income of $10,000 in 2011.

Required:

A. Prepare the journal entry on Padilla's books to record the effect of the issuance assuming

(1) Cost method

(2) Complete or partial equity method

B. Prepare the eliminating entries needed for the preparation of a consolidated statements workpaper on December 31, 2011 assuming

(1) Cost method

(2) Complete or partial equity method

Common Stock
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... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...