Interim Purchase, Partial-Year Reporting Alternative, Cost Method Using the data presented in Exercise 4-8, prepare workpaper elimination entries for 2000 assuming use of the partial-year reporting alternative. LO6 Interim Purchase, Equity Method On October 1, 2003, Para Company purchased 90% of the outstanding common stock of Star Company for $210,000. Additional data concerning Star Company for 2003 follows:
Common Stock $70,000 Other Contributed Capital 30,000 Retained Earnings, 1/1 70,000 Net Income 60,000 Dividends Declared and paid (12/15) 10,000 Any difference between cost and book value relates to goodwill. Para Company uses the equity method to record its investment in Star Company.
Required:
A. Prepare on Para Company’s books journal entries to record the investment related activities for 2003.
B. Prepare workpaper eliminating entries for a workpaper on December 31, 2003. Star Company’s net income is earned evenly throughout the year. (Use the partial-year reporting alternative.)
C. Repeat part B, but use the full-year reporting alternative.