Pratt Company purchased 40,000 shares of Silas Company's common stock for $860,000 on January 1, 2016. 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 2016 and 2017 were: Silas Company income is earned evenly throughout the year.
On September 1, 2017, 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, 2017.

Question

Pratt Company purchased 40,000 shares of Silas Company's common stock for $860,000 on January 1, 2016. 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 2016 and 2017 were:  Silas Company income is earned evenly throughout the year.
On September 1, 2017, 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, 2017.

Quizplus · Accepted Answer

The Answer of Pratt Company purchased 40,000 shares of Silas Company's common stock for $860,000 on January 1, 2016. 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 2016 and 2017 were:  Silas Company income is earned evenly throughout the year.
On September 1, 2017, 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, 2017.

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