PROBLEM $8-3$

Workpaper$$Sale of Shares by Parent, Cost Method LO $2$ LO $3$ LO $4$

The accounts of Pyle Company and its subsidiary, Stern Company, are summarized below as of December $31,2024$:

Debits

Pyle

Stern

Current Assets $$600,000$ $$320,000$

Investment in Stern Company $469,075$

Other Assets $1,180,000668,000$

Dividends Declared, $11/180,00060,000$

$$2,329,075$ $$1,048,000$

Credits

Liabilities $$190,000$ $$90,000$

Common Stock, $$5$ par $500,000300,000$

Other Contributed Capital $219,075180,000$

$1/1$ Retained Earnings $1,200,000292,000$

Net Income $220,000186,000$

$$2,329,075$ $$1,048,000$

Pyle Company made the following open$-$market purchase and sale of Stern Company common stock: January $2,2022,$ purchased $51,000$ shares, cost $$510,000$; April $1,2024,$ sold $3,000$ shares, proceeds, $$100,000.$

The book value of Stern Company's net assets on January $2,2022,$ $$600,000,($including retained earnings of $$120,000)$ approximated the fair value of those net assets. Subsequent changes in book value of the net assets are entirely attributable to earnings of Stern Company. Stern Company earns its income evenly throughout the year.

Required:

Prepare a consolidated financial statements workpaper as of December $31,2024.$ Begin the income statement section of the workpaper with $$Net Income Before Dividend Income$$ which is $$172,000$ and $$186,000$ for Pyle Company and Stern Company, respectively.