TWO: (6 marks) (B1, C2)

On January 2, 2020, Pewter Corporation made the following investments:

1. Acquired for cash 80% of the 1000 shares of outstanding common stock of Stewart Company at $70 a share. The stockholder's equity of Stewart on January 2,2020, consisted of the following:

Common stock, no par or stated value $50,000.

Retained earnings $20,000

Total stockholder's equity $70,000

2. Acquired for cash 70% of the 3,000 shares of outstanding common stock of Skate Company at $40 a share. The stockholders equity of Skate on January 2, 2020. consisted of the following:

Common stock, $20 par $ 60,000

Additional paid in capital $ 20,000

Retained earnings $ 40,000

Total stockholders equity $ 120,000

Out-of-pocket costs of the two business combinations may be disregarded. An analysis of the retained earnings of each company for year 2020 follows:

	Pewter corporation	Stewart company	Skate company
Balances beginning of year	$ 240,000	$ 20,000	$ 40,000
Net income (loss)	104,600	36,000	(12,000)
Cash dividends declared and paid, Dec 31, 2020.	(40,000)	(16,000)	(9,000)
Balance end of year	304,600	40,000	19,000

Instructions

Prepare journal entries for Pewter Corporation to record the following for year 2020:

1. Investment in subsidiaries common stock.
2. Parent company's share of subsidiaries net income or net loss (disregarding income taxes) under the equity method of accounting.
3. Parent company's share of subsidiaries dividends declared under the equity method of accounting (do not prepare journal entries for receipt of cash).