On January 1, 2010, Pasta Company purchased an 80% interest in Salsa Company for $152,000. On this date, Salsa Company reported capital stock and retained earnings of $100,000 and $90,000, respectively. During 2010, Salsa Company reported net income of $30,000 and declared a cash dividend of $35,000. At the end of 2011, Salsa Company was facing a cash shortage. Rather than distributing a cash dividend to the common stockholders, the board of directors elected to issue a 30% stock dividend. Salsa Company’s accountant recorded the stock dividend as follows:

A. Prepare a consolidated statements workpaper on December 31, 2011.
B. Prepare in general journal form the entry that would be made in the December 31, 2012, workpaper to establish reciprocity as of January 1,2012.

  • CreatedMarch 13, 2015
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