Question

The accounts of Pyle Company and its subsidiary, Stern Company, are summarized below as of December 31, 2011:




Pyle Company made the following open-market purchase and sale of Stern Company common stock:
January 2, 2009, purchased 51,000 shares (85% of Stern), cost $510,000, $10/share;
January 1, 2011, sold 40,000 shares (two-thirds of Stern), proceeds, $480,000, $12/share.
The book value of Stern Company’s net assets on January 2, 2009, $600,000, approximated the fair value of those net assets, including retained earnings of $120,000. Subsequent changes in book value of the net assets are entirely attributable to earnings of Stern Company. Stern Company earns its income evenly throughout the year.

Required:
Prepare the journal entries needed on Pyle Company’s books to record the transactions regarding the investment in Stern Company account assuming the equity method is used to account for theinvestment.


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  • CreatedMarch 13, 2015
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