On January 1, 2015, Pruitt Company issued 25,500 shares of its common stock in exchange for 85% of the outstanding common stock of Shah Company. Pruitt's common stock had a fair value of $28 per share at that time (par value of $2 per share). Pruitt Company uses the cost method to account for its investment in Shah Company and

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On January 1, 2015, Pruitt Company issued 25,500 shares of its common stock in exchange for 85% of the outstanding common stock of Shah Company. Pruitt's common stock had a fair value of $28 per share at that time (par value of $2 per share). Pruitt Company uses the cost method to account for its investment in Shah Company and files a consolidated income tax return. A schedule of the Shah Company assets acquired and liabilities assumed at book values (which are equal to their tax bases) and fair values follows.

On January 1, 2015, Pruitt Company issued 25,500 shares of

Additional Information:
1. Pruitt's income tax rate is 35%.
2. Shah's beginning inventory was all sold during 2015.
3. Useful lives for depreciation and amortization purposes are:
Plant assets 10 years
Patents 8 years
Bond premium 10 years
4. Pruitt uses the straight-line method for all depreciation and amortization purposes.
Required:
A. Prepare the stock acquisition entry on Pruitt Company's books?
B. Prepare the eliminating entries for a consolidated statements work-paper on January 1, 2015, immediately after acquisition?

Related Book For answer-question

Advanced Accounting

6th edition

Authors: Debra Jeter, Paul Chaney

ISBN: 978-1119119364