On January 1, 2023, Purdy Company acquired 84% of the capital stock of Sally Company for $840,000. On that date, Sally Company’s stockholders’ equity was:

The difference between implied and book values relates to land owned by Sally Company. On January 2, 2025, Sally Company issued 6,000 shares of its authorized capital stock, with a market value of $55 per share, to Marcy Smith in exchange for a patent. Sally Company’s retained earnings balance on this date was $400,000, capital stock and other contributed capital balances had not changed during 2023 and 2024.

Required:
A. Prepare (1) the entry on Purdy’s books to record the effect of the issuance and (2) the elimination entries for the preparation of a consolidated balance sheet workpaper immediately after the new issue of shares assuming use of the cost method.
B. Assuming that the market value of the new shares issued was $34 per share, repeat requirement A above.

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Capital Stock, $20 par Other Contributed Capital Retained Earnings Total $600,000 $200,000 $160,000 $960,000