On January 1, 2019, Pert Company purchased 85% of the outstanding common stock of Sales Company...

 

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On January 1, 2019, Pert Company purchased 85% of the outstanding common stock of Sales Company for $350,000. On that date, Sales Company's stockholders' equity consisted of common stock, $100,000; other contributed capital, $40,000; and retained earnings, $140,000. Pert Company paid more than the book value of net assets acquired because the recorded cost of Sales Company's land was significantly less than its fair value. During 2019 Sales Company earned $148,000 and declared and paid a $50,000 dividend. Pert Company used the partial equity method to record its investment in Sales Company. Required: A. Prepare the investment-related entries on Pert Company's books for 2019. B. Prepare the workpaper eliminating entries for a workpaper on December 31, 2019. EXERCISE 4-7 Equity Method, Year Subsequent to Acquisition LO 2 LO 5 Continue the situation in Exercise 4-6 and assume that during 2020 Sales Company earned $190,000 and declared and paid a $50,000 dividend. Required: A. Prepare the investment-related entries on Pert Company's books for 2020. B. Prepare the workpaper eliminating entries for a workpaper on December 31, 2020. On January 1, 2019, Pert Company purchased 85% of the outstanding common stock of Sales Company for $350,000. On that date, Sales Company's stockholders' equity consisted of common stock, $100,000; other contributed capital, $40,000; and retained earnings, $140,000. Pert Company paid more than the book value of net assets acquired because the recorded cost of Sales Company's land was significantly less than its fair value. During 2019 Sales Company earned $148,000 and declared and paid a $50,000 dividend. Pert Company used the partial equity method to record its investment in Sales Company. Required: A. Prepare the investment-related entries on Pert Company's books for 2019. B. Prepare the workpaper eliminating entries for a workpaper on December 31, 2019. EXERCISE 4-7 Equity Method, Year Subsequent to Acquisition LO 2 LO 5 Continue the situation in Exercise 4-6 and assume that during 2020 Sales Company earned $190,000 and declared and paid a $50,000 dividend. Required: A. Prepare the investment-related entries on Pert Company's books for 2020. B. Prepare the workpaper eliminating entries for a workpaper on December 31, 2020.