Question

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.

Required:
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.


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  • CreatedMarch 13, 2015
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