Adjusted equity method to account for investment

Reference no: EM13129671

New Company acquired 75 percent of Old Company's stock at underlying book value on January 1, 2009. At that date, the fair value of the noncontrolling interest was equal to 25 percent of the book value of Old Company. Old Company reported shares outstanding of $350,000 and retained earnings of $100,000. During 2009, Old Company reported net income of $60,000 and paid dividends of $3,000. In 2010, Old Company reported net income of $90,000 and paid dividends of $15,000. The following transactions occurred between New Company and Old Company in 2009 and 2010:

Old Co. sold computer equipment to New Co. for a $42,000 profit on December 26, 2009. The equipment had a five-year estimated economic life remaining at the time of intercompany transfer and is depreciated on a straight-line basis. New Co. sold land costing $90,000 to Old Company on June 28, 2010, for $110,000.

Required:

Give all eliminating entries needed to prepare a consolidation workpaper for 2010 assuming that New Co. uses the fully adjusted equity method to account for its investment in Old Company.

Reference no: EM13129671

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