Promise Enterprises acquired 90 percent of Brown Corporations voting common stock on January 1, 20X3, for $315,000.

Promise Enterprises acquired 90 percent of Brown Corporation’s voting common stock on January 1, 20X3, for $315,000. At that date, the fair value of the noncontrolling interest of Brown Corporation was $35,000. Immediately after Promise acquired its ownership, Brown purchased 60 percent of Tann Company’s stock for $120,000. The fair value of the noncontrolling interest of Tann Company was $80,000 at that date. During 20X3, Promise reported operating income of $200,000 and paid dividends of $80,000. Brown reported operating income of $120,000 and paid dividends of $50,000. Tann reported net income of $40,000 and paid dividends of $15,000. At January 1, 20X3, the stockholders’ equity sections of the balance sheets of the companies were as follows:

Required
a. Prepare the journal entries recorded by Brown for its investment in Tann during 20X3.
b. Prepare the journal entries recorded by Promise for its investment in Brown during 20X3.
c. Prepare the elimination entries related to Brown’s investment in Tann and Promise’s investment in Brown that are needed in preparing consolidated financial statements for Promise and its subsidiaries at December 31,20X3.

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Promise Brown Tann Common Stock Additional Paid-In Capital Retained Earnings Total Stockholders' Equity Enterprises Corporation Company $100,000 60,000 40,000 $200,000 $200,000 160,000 360,000 $720,000 150,000 60,000 140,000 350,000