EXERCISE 3-3

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.

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

Consolidated Balance Sheet, Stock Purchase LO 7 LO 8 On January 2, 2019, Prunce Company acquired 90% of the outstanding common stock

of Sun Company for $192,000 cash. Just before the acquisition, the balance sheets of the two companies were as follows:

Common stock, $10 par value Other contributed capital Retained earnings

Required:

Polo

$350,000 590,000 380,000

Save

$320,000 175,000 205,000

Prunce

Cash $260,000 Accounts receivable (net) 142,000 Inventory 117,000 Plant and equipment (net) 386,000 Land 63,000

Sun

$ 64,000 23,000 54,000 98,000 32,000

$271,000

$ 47,000 39,000 70,000 20,000 95,000

$271,000

Total asset

Accounts payable Mortgage payable Common stock, $2 par value Other contributed capital Retained earnings

Total equities

$968,000

$104,000 72,000 400,000 208,000 184,000

$968,000