Condensed financial information for Prince Company and South Company follows:

Separate Statements of Income and Retained Earnings
for the Year Ended December 31, 2011

Prince Company purchased 80% of South Company’s common stock for $1,000,000 at the beginning of 2010 and uses the partial equity method to account for the investment. At the time of purchase, South Company reported a common stock balance of $1,000,000 and a retained earnings balance of $250,000. On July 1, 2011, Prince Company purchased 60% of South Company’s 10% bonds for $315,000. The bonds mature on December 31, 2013. Interest is paid on June 30 and December 31.

A. Prepare the entries made on the books of Prince Company during 2011 to record its interest in South Company and account for the bond investment.
B. Prepare a consolidated financial statements workpaper on December 31,2011.

  • CreatedMarch 13, 2015
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