Reference no: EM132782851

Peters Corporation purchased 70% of the common stock of Smith Corporation on January 1, 20x5, for $400,000. Smith Corporation's stockholders' equity on that date was as follows:

Common stock, $10 par value $300,000

Other contributed capital 100,000

Retained earnings 50,000

Problem 1: During 20x5, Smith Corporation earned $200,000 and declared an $80,000 dividend. The difference btween implied and book value of the net assets purchased relates to the misvaluation of Smith Corporation land. Two eliminating entries are prepared on a consolidating workpaper on 12/31/x5, and Peters Corporation accounts for its investment in Smith Corporation using the partial equity method. Accordingly, the aforementioned eliminating entries would contain:

a. a debit to Investment in Scott Corporation for $400,000.

b. a credit to Dividends Declared for $80,000.

c. a credit to Noncontrolling Interest for $155,000.

d. a debit to Equity in Subsidiary Income for $140,000.

e. a credit to Land for $50,000.