Question
) On January 1, 2018, Pamela Corporation made the following investments: -Acquired for cash, 70 percent of the outstanding common stock of Sally Corporation at
) On January 1, 2018, Pamela Corporation made the following investments:
-Acquired for cash, 70 percent of the outstanding common stock of Sally Corporation at $140 per share
-Acquired for cash, 60 percent of the outstanding common stock of Sara Corporation at $80
per share
The stockholders' equity of the two companies on January 1, 2018 were as follows:
Sally Corporation
Sara Corporation
Common stock, par value $100
Common stock, par value $40
$100,000
$120,000
Capital in excess of par value
40,000
Retained earnings
40,000
80,000
- After these investments were made, Pamela was able to exercise control over the operations of
both companies. An analysis of the retained earnings of each company for 2018 is as follows:
Pamela Sally Sara
Balance January 1 $480,000 $40,000 $80,000
Net income (loss) 209,200 72,000 (24,000)
Cash dividends paid (80,000) (32,000) (18,000)
Balance December 31 $609,200 $80,000 $38,000
Required:
1. What entries should have been made on the books of Pamela during 2018 to record the following:
a. Investments in subsidiaries
b. Subsidiary dividends received
c. Parent's share of subsidiary income or loss
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