Description

37) Prune Company purchased 80% of the outstanding common stock of Selma Company on January 2, 2016, for $680,000. The composition of Selma Companys stockholders equity on January 2, 2016, and December 31, 2017, was:

1/2/1612/31/17

Common stock $540,000 $540,000

Other contributed capital 325,000 325,000

Retained earnings (deficit) (60,000) 295,000

Total stockholders equity $805,000 $1,160,000

During 2017, Selma Company earned $210,000 net income and declared a $60,000 dividend. Any difference between implied and book value relates to land. Prune Company uses the cost method to record its investment in Selma Company.

Required:

A. Prepare any journal entries that Prune Company would make on its books during 2017 to record the effects of its investment in Selma Company.

B. Prepare, in general journal form, all workpaper entries needed for the preparation of a consolidated statements workpaper on December 31, 2017.

38) P Company purchased 90% of the common stock of S Company on January 2, 2017 for $900,000. On that date, S Companys stockholders equity was as follows:

Common stock, $20 par value$400,000

Other contributed capital100,000

Retained earnings450,000

During 2017, S Company earned $200,000 and declared a $100,000 dividend. P Company uses the partial equity method to record its investment in S Company. The difference between implied and book value relates to land.

Required:

Prepared, in general journal form, all eliminating entries for the preparation of a consolidated statements workpaper on December 31, 2017.