Pizza Company purchased Salt Company common stock through open-market purchases as follows:
Salt Company had 12,000 shares of $20 par value common stock outstanding during the entire period.Salt had the following retained earnings balances on the relevant dates:
Salt Company declared no dividends in 2012 or 2013 but did declare $60,000 of dividends in 2014.Any difference between cost and book value is assigned to subsidiary land.Pizza uses the equity method to account for its investment in Salt.
Required:
A.Prepare the journal entries Pizza Company will make during 2013 and 2014 to account for its investment in Salt Company.
B.Prepare workpaper eliminating entries necessary to prepare a consolidated statements workpaper on December 31, 2014.

Question

Pizza Company purchased Salt Company common stock through open-market purchases as follows:  
Salt Company had 12,000 shares of $20 par value common stock outstanding during the entire period.Salt had the following retained earnings balances on the relevant dates:  
Salt Company declared no dividends in 2012 or 2013 but did declare $60,000 of dividends in 2014.Any difference between cost and book value is assigned to subsidiary land.Pizza uses the equity method to account for its investment in Salt.
Required:
A.Prepare the journal entries Pizza Company will make during 2013 and 2014 to account for its investment in Salt Company.
B.Prepare workpaper eliminating entries necessary to prepare a consolidated statements workpaper on December 31, 2014.

Quizplus · Accepted Answer

The Answer of Pizza Company purchased Salt Company common stock through open-market purchases as follows:  
Salt Company had 12,000 shares of $20 par value common stock outstanding during the entire period.Salt had the following retained earnings balances on the relevant dates:  
Salt Company declared no dividends in 2012 or 2013 but did declare $60,000 of dividends in 2014.Any difference between cost and book value is assigned to subsidiary land.Pizza uses the equity method to account for its investment in Salt.
Required:
A.Prepare the journal entries Pizza Company will make during 2013 and 2014 to account for its investment in Salt Company.
B.Prepare workpaper eliminating entries necessary to prepare a consolidated statements workpaper on December 31, 2014.

Pizza Company Purchased Salt Company Common Stock Through Open-Market Purchases