Use the data presented in Exercise 8- 2, but assume use of the complete or the partial equity method rather than the cost method.

Required:
A. Prepare the journal entries Papke Company will make on its books during 2023 and 2024 to account for its investment in Serbin Company.
B. Prepare the workpaper eliminating entries needed for a consolidated statements workpaper on December 31, 2024.

Data from exercise 2

Papke Company acquired 85% of the common stock of Serbin Company in two separate cash transactions. The first purchase of 72,000 shares (60%) on January 1, 2023, cost $490,000. The second purchase, on January 1, 2024, of 30,000 shares (25%) cost $220,000. Serbin Company’s stockholders’ equity was as follows:

On April 1, 2024, after a significant rise in the market price of Serbin Company’s stock, Papke Company sold 21,600 of its Serbin Company shares for $260,000. Serbin Company notified Papke Company that its net income for the first three months was $15,000. The shares sold were identified as those obtained in the first purchase. Any difference between implied and book values relates to goodwill. Papke uses the cost method to account for its investment in Serbin Company.

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Common Stock, $5 par Retained Earnings, 1/1 Net Income Dividends Declared, 9/30 Retained Earnings, 12/31 Total Stockholders' Equity, 12/31 2023 $600,000 175,000 46,000 (20,000) 201,000 $801,000 2024 $600,000 201,000 60,000 (25,000) 236,000 $836,000