Question

On January 1, 2009, Plank Company purchased 80% of the outstanding capital stock of Scoba Company for $53,000. At that time, Scoba’s stockholders’ equity consisted of capital stock, $55,000; other contributed capital, $5,000; and retained earnings, $4,000. On December 31, 2013, the two companies’ trial balances were as follows:


The accounts payable of Scoba Company include $3,000 payable to Plank Company.

Required:
A. What method is being used by Plank to account for its investment in Scoba Company?
How can you tell?
B. Prepare a consolidated statements workpaper at December 31, 2013. Any difference between book value and the value implied by the purchase price relates to subsidiaryland.


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  • CreatedMarch 13, 2015
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