Exercise 4-8 On May 1, 2015, Peters Company purchased 80% of the common stock of Smith...

Exercise 4-8

On May 1, 2015, Peters Company purchased 80% of the common stock of Smith Company for $53,100. Additional data concerning these two companies for the years 2015 and 2016 are:

	*2015*		*2016*
	*Peters*	*Smith*	*Peters*	*Smith*
Common stock	$103,300	$27,200	$103,300	$27,200
Other contributed capital	38,900	9,000	38,900	9,000
Retained earnings, 1/1	72,100	10,100	115,800	53,000
Net income (loss)	58,300	44,700	39,400	(5,300	)
Cash dividends (11/30)	14,600	1,800	4,700	—0—

Any difference between book value and the value implied by the purchase price relates to Smith Company’s land. Peters Company uses the cost method to record its investment.

(a)

Prepare the workpaper entries that would be made on a consolidated statements workpaper for the years ended December 31, 2015 and 2016 for Peters Company and its subsidiary, assuming that Smith Company’s income is earned evenly throughout the year. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
2015

	(To record dividend income)







	(To eliminate investment in subsidiary and create noncontrolling interest)


	(To eliminate excess of the book value of equity acquired.)
2016

	(To establish reciprocity)






	(To eliminate investment in subsidiary and create noncontrolling interest)

Solutions

Expert Solution

ekkarill92 answered 1 year ago

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