On January 1, 2010, Jones Company bought 15% of Whitton Company. Jones paid $150,000 for these shares, an amount that exactly equaled the proportionate book value of Whitton. On January 1, 2011, Whitton acquired 80% ownership of Jones. The following data are available concerning Whitton's acquisition of Jones:
Consideration transferred for 80% interest, January 1, 2011: $800,000
Jones' reported book value, January 1, 2011: 900,000
Excess fair value over book value (assigned to trademarks) is amortized over 20 years.
The initial value method is used by both companies.
The following information is available regarding Jones and Whitton:
-What would be included in a consolidation worksheet entry for 2011?
A) Debit treasury stock, $135,000.
B) Credit treasury stock, $135,000.
C) Debit treasury stock, $150,000.
D) Credit treasury stock, $150,000.
E) Debit common stock, $150,000.

Question

On January 1, 2010, Jones Company bought 15% of Whitton Company. Jones paid $150,000 for these shares, an amount that exactly equaled the proportionate book value of Whitton. On January 1, 2011, Whitton acquired 80% ownership of Jones. The following data are available concerning Whitton's acquisition of Jones:
Consideration transferred for 80% interest, January 1, 2011: $800,000
Jones' reported book value, January 1, 2011: 900,000
Excess fair value over book value (assigned to trademarks) is amortized over 20 years.
The initial value method is used by both companies.
The following information is available regarding Jones and Whitton: 
-What would be included in a consolidation worksheet entry for 2011?
A) Debit treasury stock, $135,000. 
B) Credit treasury stock, $135,000. 
C) Debit treasury stock, $150,000. 
D) Credit treasury stock, $150,000. 
E) Debit common stock, $150,000.

Quizplus · Accepted Answer

When Whitton acquired 80% ownership of Jones, it resulted in the elimination of Jones' equity accounts including common stock, additional paid-in capital, and retained earnings, as well as the elimination of the investment account in Whitton held by Jones. 
The consolidation worksheet entry would include a debit to the treasury stock account for the original investment amount of $150,000, as this account would need to be eliminated to reflect the new ownership structure. Therefore, choice C is the correct answer.

On January 1, 2010, Jones Company Bought 15% of Whitton