On January 1, 2024, 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, 2020. Sime Company’s stockholders’ equity just before each of the two purchases was as follows:

During 2024, 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, 2024.
B. Prepare the eliminating entries needed for the preparation of a consolidated statements workpaper on December 31, 2024.

Transcribed Image Text:

Common Stock $1 par Other Contributed Capital Retained Earnings Total December 31, 2019 $500,000 40,000 60,000 $600,000 December 31, 2023 $500,000 40,000 150,000 $690,000