Question: Track Company owns a 90 interest in Trail Company on

Track Company owns a 90% interest in Trail Company on January 1, 2011, when Trail has the following stockholders’ equity:
Common stock ($10 par) ......... $100,000
Paid-in capital in excess of par ...... 250,000
Retained earnings ........... 200,000
Total stockholders’ equity ......... $550,000
The investment is purchased for book value, $495,000.
On July 1, 2011, Trail sells 2,000 additional shares to non-controlling shareholders in a private offering for $80 per share. Trail’s net income for 2011 is $70,000, and the income is earned evenly during the year. Track uses the simple equity method to record the investment in Trail. Summary entries are made each December 31 to record the year’s activity.
Prepare Track’s equity adjustments for 2011 that result from the above activities of Trail Company during 2011. Assume Track has $500,000 of paid-in capital in excess of par.

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  • CreatedApril 13, 2015
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