Question: Stable Home Builders Inc acquired 80 percent of Acme Concrete

Stable Home Builders Inc. acquired 80 percent of Acme Concrete Works stock on January 1, 20X3, for $360,000. At that date, the fair value of the noncontrolling interest was $90,000. Acme Concrete’s balance sheet contained the following amounts at the time of the combination:

During each of the next three years, Acme reported net income of $50,000 and paid dividends of $20,000. On January 1, 20X5, Stable sold 4,000 of the Acme $10 par value shares for $120,000 in cash. Stable used the basic equity method in accounting for its ownership of Acme.

a. Compute the balance in the investment account reported by Stable on January 1, 20X5, before its sale of shares.
b. Prepare the entry recorded by Stable when it sold the Acme shares, assuming Stable records the excess of the sale price over the carrying value of the shares as an increase in additional paid-in capital.
c. Prepare the appropriate elimination entries to complete a full consolidation worksheet for20X5.
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  • CreatedMay 23, 2014
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