Parent Entries and Eliminating Entries, Equity Method, Year of Acquisition On January 1, 2002, Pert Company purchased 85% of the outstanding common stock of Sales Company for $350,000. On that date, Sales Company’s stockholders’ equity consisted of common stock, $100,000; other contributed capital, $40,000; and retained earnings, $140,000. Pert Company paid more than the book value of net assets acquired because of goodwill.
During 2002 Sales Company earned $148,000 and declared and paid a $50,000 dividend.
Pert Company uses the equity method to record its investment in Sales Company. LO6 Required:
A. Prepare the investment-related entries on Pert Company’s books for 2002.
B. Prepare the workpaper eliminating entries for a workpaper on December 31, 2002.