Reference no: EM132743466
Question: On January 1, 2014, Paterson Company purchased 60% of the common stock of Smith Company for $540,000. At that time, Smith's stockholders' equity consisted of $70,000 of Common stock, $190,000 of other contributed capital, and $240,000 of Retained earnings. Any difference between implied and book value relates to Smith's land. Paterson uses the cost method to record its investment in Smith. Its fiscal year ends on December 31.
Additional information for both companies for 2020 follows:
Paterson Smith
Common stock $300,000 $70,000
Other contributed capital 520,000 190,000
Retained Earnings, 1/1/2020 940,000 370,000
Net Income for 2020 262,000 89,000
Dividends declared in 2020 40,000 21,000
Required: (a) Make all the necessary eliminating entries on a consolidated statements workpaper on 12/31/2020.
(b) Calculate the consolidated net income for 2020.