Exercise 3-2

On January 1, 2014, Polo Company purchased 100% of the common stock of Save Company by issuing 42,060 shares of its (Polos) $10 par value common stock with a market price of $18.10 per share. Polo incurred cash expenses of $18,210 for registering and issuing the common stock. The stockholders equity section of the two companies balance sheets on December 31, 2013, were:

		Polo		Save
Common stock, $10 par value		$325,900		$291,030
Other contributed capital		630,640		173,360
Retained earnings		389,630		296,896

(a)

Prepare the journal entry on the books of Polo Company to record the purchase of the common stock of Save Company and related expenses. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit

(b)

Prepare the elimination entry required for the preparation of a consolidated balance sheet workpaper on the date of acquisition.