On January 1, 2014, Plum Company made an open-market purchase of 30,000 shares of Spivey Company...

On January 1, 2014, Plum Company made an open-market purchase of 30,000 shares of Spivey Company com-mon stock for $122,000. At that time, Spivey Company had common stock ($2 par) of $600,000 and retainedearnings of $240,000. On July 1, 2014, an additional 210,000 shares were purchased on the open market by PlumCompany at a cost of $789,600 or $3.76 a share. On November 1, 2014, 3,000 of the shares purchased on Janu-ary 1, 2014, were sold on the open market for $21,000. Assume that any excess of implied value over book valueacquired relates to subsidiary goodwill.During 2014, Plum Company earned $22,000 (excluding any gain or loss on the sale of the shares). PlumCompany received income statements from Spivey Company reporting the following results.

Spivey company income

January 1 2014 to June 30 2014 $ 60,000

January 1 2014 to October 31 2014 96,0000

For the year ended December 31 2014 130,000

Neither company declared dividends during the year. Plum Company’s retained earnings were $460,000 onJanuary 1, 2014.

A.Prepare the book entries Plum Company would make during 2014 to account for its investment in SpiveyCompany, assuming(1)The use of the cost method.(2)The use of either the complete or the partial equity method

.B.Prepare in general journal form the eliminating entries for a consolidated statements workpaper onDecember 31, 2014, assuming(1)The use of the cost method.(2)The use of either the complete or the partial equity method

.C.Compute controlling interest in consolidated net income for 2014.

Expert Solution

ekkarill92 answered 1 year ago

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