Prune Company purchased 80% of the outstanding common stock of Selma Company on January 2, 2016, for $680,000. The composition of Selma Company's stockholders' equity on January 2, 2016, and December 31, 2017, was: During 2017, Selma Company earned $210,000 net income and declared a $60,000 dividend. Any difference between implied and book value relates to land. Prune Company uses the cost method to record its investment in Selma Company.
Required:
A. Prepare any journal entries that Prune Company would make on its books during 2017 to record the effects of its investment in Selma Company.
B. Prepare, in general journal form, all workpaper entries needed for the preparation of a consolidated statements workpaper on December 31, 2017.

Question

Prune Company purchased 80% of the outstanding common stock of Selma Company on January 2, 2016, for $680,000. The composition of Selma Company's stockholders' equity on January 2, 2016, and December 31, 2017, was:  During 2017, Selma Company earned $210,000 net income and declared a $60,000 dividend. Any difference between implied and book value relates to land. Prune Company uses the cost method to record its investment in Selma Company.
Required:
A. Prepare any journal entries that Prune Company would make on its books during 2017 to record the effects of its investment in Selma Company.
B. Prepare, in general journal form, all workpaper entries needed for the preparation of a consolidated statements workpaper on December 31, 2017.

Quizplus · Accepted Answer

The Answer of Prune Company purchased 80% of the outstanding common stock of Selma Company on January 2, 2016, for $680,000. The composition of Selma Company's stockholders' equity on January 2, 2016, and December 31, 2017, was:  During 2017, Selma Company earned $210,000 net income and declared a $60,000 dividend. Any difference between implied and book value relates to land. Prune Company uses the cost method to record its investment in Selma Company.
Required:
A. Prepare any journal entries that Prune Company would make on its books during 2017 to record the effects of its investment in Selma Company.
B. Prepare, in general journal form, all workpaper entries needed for the preparation of a consolidated statements workpaper on December 31, 2017.

Prune Company Purchased 80% of the Outstanding Common Stock of Selma