Question

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.

Required:
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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