Question

Pryor Company acquired 51,000 shares of Spero Company’s common stock on January 1,2010, for $400,000 when Spero Company had common stock ($5 par) of $300,000 and retained earnings of $200,000.
On January 1, 2012, Spero Company issued 7,500 additional shares of its common stock for $8.50 per share. The new shares were purchased entirely by Pryor Company. Spero Company’s retained earnings had increased to $360,000 by that date.
During 2012, Spero Company declared dividends of $40,000 and reported net income at year-end of $90,000. Pryor Company uses the cost method. Assume that any difference between implied and book values relates to subsidiary land.

Required:
A. Prepare the journal entry on Pryor’s books to record the purchase of the new shares.
B. Prepare in general journal form the workpaper entries needed for the preparation of aconsolidated statements workpaper on December 31, 2012.



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  • CreatedMarch 13, 2015
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