Question

On January 1, 2011, Pacelli Company acquired a 90% interest in Swartz Corporation for $720,000. On this date, Swartz Corporation reported common stock of $500,000 and retained earnings of $200,000. Any difference between implied and book value interest acquired is attributable to the under- or overvaluation of land.
Other information pertaining to Swartz Corporation follows:
2011 Net income $65,000
2011 Cash dividends 90,000

2012 Net income 80,000
2012 Cash dividends 40,000

Pacelli Company uses the partial equity method to account for its investment in Swartz Corporation.

Required:
A. Prepare the general journal entries for 2011 and 2012 to record the receipt of the cash dividends.
B. Prepare all determinable workpaper entries that would be made in the preparation of 2011 consolidated statements workpaper.
C. Prepare all determinable workpaper entries that would be made in the preparation of consolidated statements for 2012.
D. How would the entry in part A change if the cost method was used to account for the investment?



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  • CreatedMarch 13, 2015
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