On January 1, 2024, Plum Company purchased a 10% interest in Spivey Company by acquiring 30,000 shares

Question:

On January 1, 2024, Plum Company purchased a 10% interest in Spivey Company by acquiring 30,000 shares of Spivey Company common stock for $122,100 (or $4.07 per share). At that time, Spivey Company had common stock of $600,000 ($2 par and 300,000 shares) and retained earnings of $240,000. Plum classified the investment as an available for sale security. On July 1, 2024, an additional 210,000 shares were purchased (or 80% of Spivey) on the open market by Plum Company at a cost of $789,600 or $3.76 a share. Because Plum has control, Plum can choose to account for the investment using either the cost or the equity method. On November 1, 2024, 3,000 of the shares purchased on January 1, 2024, were sold (1%) on the open market for $6,000 (or $3,50 per share). Assume that any excess of implied value over book value acquired relates to subsidiary goodwill. During 2024, Plum Company earned $22,000 (excluding any gain or loss on the sale of the shares). Plum Company received income statements from Spivey Company reporting the following results.

Neither company declared dividends during the year. Plum Company’s retained earnings were $460,000 on January 1, 2024.

Required:
A. Prepare the book entries Plum Company would make during 2024 to account for its investment in Spivey Company, assuming
(1) The use of the cost method.
(2) The use of either the complete or the partial equity method.
B. Prepare in general journal form the eliminating entries for a consolidated statements workpaper on December 31, 2024, assuming
(1) The use of the cost method.
(2) The use of either the complete or the partial equity method.
C. Compute controlling interest in consolidated net income for 2024.