Effect of the issuance assuming cost method

Reference no: EM13147013

On January 1, 2008, P Company acquired 90% of the common stock of S Company for $650,000. At that time, S had common stock ($5 par) of $500,000 and retained earnings of $200,000.

On January 1, 2010, S issued 20,000 shares of its unissued common stock, with a market value of $7 per share, to noncontrolling stockholders. S company's retained earnings balance on this date was $300,000. Any difference between cost and book value relates to S company's land. No dividends were declared in 2010.

Required:

A. Prepare the entry on P Company's books to record the effect of the issuance assuming the cost method.

B. Prepare the elimination entries for the preparation of a consolidated statements workpaper on December 31, 2010 assuming the cost method.

Reference no: EM13147013

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