The Little Company is a subsidiary of the Butler Company carried at cost on the singlecompany books of the Butler Company.

a Present journal entries for the following selected transactions. Record the set of entries on the books of the Little Company separately from the set of entries on the books of the Butler Company.

(1) On January 2, the Butler Company acquired on the market, for cash, 80 percent of all the capital stock of the Little Company. The outlay was \(\$ 325,000\). The total contributed capital of the stock outstanding was \(\$ 300,000\); the retained earnings balance was \(\$ 80,000\). The excess of cost over book value acquired is all attributed to goodwill.

(2) The Little Company purchased materials from the Butler Company at the latter's cost, \(\$ 23,000\).

(3) The Little Company obtained an advance of \(\$ 9,000\) from the Butler Company. The funds were deposited in the bank.

(4) The Little Company paid \(\$ 19,000\) on the purchases in (2) above.

(5) The Little Company repaid \(\$ 7.500\) of the loan received from the Butler Company in (3) above.

(6) The Little Company declared and paid a dividend of \(\$ 24,000\) during the year.
(7) The "net income to stockholders" of the Little Company for the year was \(\$ 40,000\) Present only the entry to close the Income Summary account.
b Prepare the adjustment and elimination entries which would be necessary in the preparation of the December 31 consolidated balance sheet, recognizing the effects of only the above transactions. Amortize goodwill over 40 years.