Parent Company and Workpaper Entries$$New Shares Issued by Subsidiary Lo $5$

On January $1,2019,$ Pace Company purchased $250,000$ shares of common stock directly from its

subsidiary, Sime Company, for $$1\mathrm{.}50$ per share. Noncontrolling stockholders elected not to partic$-$

ipate in the new issue.

Pace Company acquired its initial $92\mathrm{.}5\%$ interest in Sime Company by purchasing on the open

market $462,500$ shares of Sime's common stock for $$578,125$ on January $1,2015.$ Sime Company's

stockholders' equity just before each of the two purchases was as follows:

During $2019,$ Sime Company reported $$90,000$ net income and declared a dividend in the

amount of $$30,000.$ Any difference between implied and book values relates to subsidiary land.

Pace uses the cost method to account for its investment.

Required:

A$.$ Prepare the journal entry on Pace Company's books to record the purchase of the additional

shares on January $1,2019.$

B$.$ Prepare the eliminating entries needed for the preparation of a consolidated statements

workpaper on December $31,2019.$EXERCISE $8-6$ Parent Company and Workpaper Entries$$New Shares Issued by Subsidiary Lo $5$

On January $1,2019,$ Pace Company purchased $250,000$ shares of common stock directly from its

subsidiary, Sime Company, for $$1\mathrm{.}50$ per share. Noncontrolling stockholders elected not to partic$-$

ipate in the new issue.

Pace Company acquired its initial $92\mathrm{.}5\%$ interest in Sime Company by purchasing on the open

market $462,500$ shares of Sime's common stock for $$578,125$ on January $1,2015.$ Sime Company's

stockholders' equity just before each of the two purchases was as follows:

During $2019,$ Sime Company reported $$90,000$ net income and declared a dividend in the

amount of $$30,000.$ Any difference between implied and book values relates to subsidiary land.

Pace uses the cost method to account for its investment.

Required:

A$.$ Prepare the journal entry on Pace Company's books to record the purchase of the additional

shares on January $1,2019.$

B$.$ Prepare the eliminating entries needed for the preparation of a consolidated statements

workpaper on December $31,2019.$