Pratt Corporation acquired 90 percent of Splatt Corporation's common shares on January 1,20X6,at underlying book value.At that date,the fair value of the noncontrolling interest was equal to 10 percent of the book value of Splatt.Splatt Corporation prepared the following balance sheet as of January 1,20X9:

The company is considering the following alternatives:
1.A 3-for-1 stock split
2.A stock dividend of 7,000 shares on its $5 par value common stock
3.A stock dividend of 2,000 shares on its $5 par value common stock
The current market price per share of Splatt stock on January 1,20X9,is $15.
Required:
Give the investment elimination entry required to prepare a consolidated balance sheet at the close of business on January 1,20X9,for each of the alternative transactions under consideration by Splatt Corporation.

Question

Pratt Corporation acquired 90 percent of Splatt Corporation's common shares on January 1,20X6,at underlying book value.At that date,the fair value of the noncontrolling interest was equal to 10 percent of the book value of Splatt.Splatt Corporation prepared the following balance sheet as of January 1,20X9:
  
The company is considering the following alternatives:
1.A 3-for-1 stock split
2.A stock dividend of 7,000 shares on its $5 par value common stock
3.A stock dividend of 2,000 shares on its $5 par value common stock
The current market price per share of Splatt stock on January 1,20X9,is $15.
Required:
Give the investment elimination entry required to prepare a consolidated balance sheet at the close of business on January 1,20X9,for each of the alternative transactions under consideration by Splatt Corporation.

Quizplus · Accepted Answer

The Answer of Pratt Corporation acquired 90 percent of Splatt Corporation's common shares on January 1,20X6,at underlying book value.At that date,the fair value of the noncontrolling interest was equal to 10 percent of the book value of Splatt.Splatt Corporation prepared the following balance sheet as of January 1,20X9:
  
The company is considering the following alternatives:
1.A 3-for-1 stock split
2.A stock dividend of 7,000 shares on its $5 par value common stock
3.A stock dividend of 2,000 shares on its $5 par value common stock
The current market price per share of Splatt stock on January 1,20X9,is $15.
Required:
Give the investment elimination entry required to prepare a consolidated balance sheet at the close of business on January 1,20X9,for each of the alternative transactions under consideration by Splatt Corporation.

Pratt Corporation Acquired 90 Percent of Splatt Corporation's Common Shares