Question
On January 1, 2017, P Company purchased 85% of the outstanding common stock of S Company for $425,000 cash. On that date, S Companys stockholders
On January 1, 2017, P Company purchased 85% of the outstanding common stock of
S Company for $425,000 cash. On that date, S Companys stockholders equity
consisted of common stock, $150,000; other contributed capital, $60,000; and retained earnings,
$210,000. As of the acquisition date, S Companys land was found to have a fair value
$200,000 greater than its book value.
During 2017 S Company earned $222,000 and declared and paid a $75,000 dividend.
P Company used the partial equity method to record its investment in S Company.
Required
A. Prepare the investment related entries on P Companys books for 2017.
B. Prepare the workpaper eliminating entries for a workpaper on December 31,
2017.
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