Reference no: EM132753300
Question: Sarko Company had 400,000 shares of $8 par value common stock outstanding at all times, and retained earnings balances as indicated here:
Retained Earnings
January 1, 2013 $260,000
January 1, 2014 540,000
January 1, 2015 630,000
January 1, 2016 820,000
Pelzer Company acquired Sarko Company stock through open-market purchases as follows:
Date % Acquired Shares Cost
1/1/13 10% 30,000 $ 365,000
1/1/14 25% 75,000 960,000
1/1/15 45% 135,000 1,890,000
Sarko Company declared no dividends during this period. The fair values of Sarko Company's assets and liabilities were approximately equal to their book values throughout this period (2013 through 2015). Pelzer Company uses the cost method.
Required: A. Prepare schedule to compare investment cost with the book value of equity acquired.
B. Prepare elimination entries for the preparation of a consolidated statements workpaper on December 31, 2015.
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