Question: On January 1 2011 Pace Company purchased 250 000 shares of

On January 1, 2011, Pace Company purchased 250,000 shares of common stock directly from its subsidiary, Sime Company, for $1.50 per share. Noncontrolling stockholders elected not to participate in the new issue.
Pace Company acquired its initial 92.5% interest in Sime Company by purchasing on the open market 462,500 shares of Sime’s common stock for $578,125 on January 1, 2007. Sime Company’s stockholders’ equity just before each of the two purchases was as follows:

During 2011 Sime Company reported $90,000 net income and declared a dividend in the amount of $30,000. Any difference between implied and book values relates to subsidiary land. Pace uses the cost method to account for its investment.

A. Prepare the journal entry on Pace Company’s books to record the purchase of the additional shares on January 1, 2011.
B. Prepare the eliminating entries needed for the preparation of a consolidated statements workpaper on December 31,2011.

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  • CreatedMarch 13, 2015
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