Pratt Company purchased 40,000 shares of Silas Company's common stock for $860,000 on January 1, 2013.At that time Silas Company had $500,000 of $10 par value common stock and $300,000 of retained earnings.Silas Company's income earned and increase in retained earnings during 2013 and 2014 were:
Silas Company income is earned evenly throughout the year.
On September 1, 2014, Pratt Company sold on the open market, 12,000 shares of its Silas Company stock for $460,000.Any difference between cost and book value relates to Silas Company land.Pratt Company uses the cost method to account for its investment in Silas Company.
Required:
A.Compute Pratt Company's reported gain (loss) on the sale.
B.Prepare all consolidated statements workpaper eliminating entries for a workpaper on December 31, 2014.

Question

Pratt Company purchased 40,000 shares of Silas Company's common stock for $860,000 on January 1, 2013.At that time Silas Company had $500,000 of $10 par value common stock and $300,000 of retained earnings.Silas Company's income earned and increase in retained earnings during 2013 and 2014 were:  
Silas Company income is earned evenly throughout the year.
On September 1, 2014, Pratt Company sold on the open market, 12,000 shares of its Silas Company stock for $460,000.Any difference between cost and book value relates to Silas Company land.Pratt Company uses the cost method to account for its investment in Silas Company.
Required:
A.Compute Pratt Company's reported gain (loss) on the sale.
B.Prepare all consolidated statements workpaper eliminating entries for a workpaper on December 31, 2014.

Quizplus · Accepted Answer

The Answer of Pratt Company purchased 40,000 shares of Silas Company's common stock for $860,000 on January 1, 2013.At that time Silas Company had $500,000 of $10 par value common stock and $300,000 of retained earnings.Silas Company's income earned and increase in retained earnings during 2013 and 2014 were:  
Silas Company income is earned evenly throughout the year.
On September 1, 2014, Pratt Company sold on the open market, 12,000 shares of its Silas Company stock for $460,000.Any difference between cost and book value relates to Silas Company land.Pratt Company uses the cost method to account for its investment in Silas Company.
Required:
A.Compute Pratt Company's reported gain (loss) on the sale.
B.Prepare all consolidated statements workpaper eliminating entries for a workpaper on December 31, 2014.

Pratt Company Purchased 40,000 Shares of Silas Company's Common Stock