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    Advanced Accounting

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    gisela gilberta
    - Pelzer Company acquired shares of Sarko Company stock through open market purchases on January 1st of 2013, 2014, and 2015, obtaining a total of 80% ownership. - Pelzer used the cost method to account for its investment in Sarko. A schedule was prepared to compare the investment cost to Sarko's book value of equity acquired on each date. - Eliminating entries were also prepared to eliminate the investment account and retained earnings on the consolidated balance sheet as of December 31, 2015.

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    Advanced Accounting

    Uploaded by

    gisela gilberta
    216 views4 pages
    - Pelzer Company acquired shares of Sarko Company stock through open market purchases on January 1st of 2013, 2014, and 2015, obtaining a total of 80% ownership. - Pelzer used the cost method to account for its investment in Sarko. A schedule was prepared to compare the investment cost to Sarko's book value of equity acquired on each date. - Eliminating entries were also prepared to eliminate the investment account and retained earnings on the consolidated balance sheet as of December 31, 2015.

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    - Pelzer Company acquired shares of Sarko Company stock through open market purchases on January 1st of 2013, 2014, and 2015, obtaining a total of 80% ownership. - Pelzer used the cost method to account for its investment in Sarko. A schedule was prepared to compare the investment cost to Sarko's book value of equity acquired on each date. - Eliminating entries were also prepared to eliminate the investment account and retained earnings on the consolidated balance sheet as of December 31, 2015.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    216 views4 pages

    Advanced Accounting

    Uploaded by

    gisela gilberta
    - Pelzer Company acquired shares of Sarko Company stock through open market purchases on January 1st of 2013, 2014, and 2015, obtaining a total of 80% ownership. - Pelzer used the cost method to account for its investment in Sarko. A schedule was prepared to compare the investment cost to Sarko's book value of equity acquired on each date. - Eliminating entries were also prepared to eliminate the investment account and retained earnings on the consolidated balance sheet as of December 31, 2015.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 4

    GISELA GILBERTA

    2101686556
    LD53

    Problem 8-1 Multiple Stock Purchase


    Sarko Company had 300,000 shares of $10 par value common stock outstandaing at all times, and retained earnings b

    January 1, 2013
    January 1, 2014
    January 1, 2015
    January 1, 2016
    Pelzer Company acquired Sarko Company stock through open-market purchases as follows:
    Date % Acquired
    1/1/2013 10%
    1/1/2014 25%
    1/1/2015 45%
    80%

    Sarko declared no dividends during this period. The fair values of Sarko Company's assets and liabilities were approx
    throughout this period (2013 through 2015). Pelzer Company uses the cost method.

    Required:
    A. Prepare a schedule to compare investment cost with the book value of equity acquired.
    Computation and Allocation Difference Schedule
    Parent Share
    80%
    Value implied by purchase price $ 3,360,000
    Less : Book value of equity acquired
    Common Stock $ 2,400,000
    Retained Earnings $ 504,000
    Total Book Value $ 2,904,000
    Difference between implied and book value $ 456,000
    Goodwill $ (456,000)
    Balance $ -

    B. Prepare elimination entries for the preparation of a consolidated statements workpaper on December 31, 20

    Elimination Entries
    Jurnal Reciprocity:
    Investment in Sarko Company $ 59,500
    1/1 Retained Earnings
    1/1 Retained Earnings:
    Change in Retained Earnings, 1/1/13 $ 37,000
    Change in Retained Earnings, 1/1/14 $ 22,500
    $ 59,500

    Common Stock - Sarko Company $ 3,000,000


    1/1 Retained Earnings - Sarko Company $ 630,000
    Difference between implied and book value $ 570,000
    Investment in Sarko Company
    NCI in Equity

    Goodwill $ 570,000
    Difference between implied and book value
    Multiple Stock Purchase
    tstandaing at all times, and retained earnings balances as indicated here:
    Retained Earnings
    $ 260,000
    $ 540,000
    $ 630,000
    $ 820,000
    purchases as follows:
    Shares Cost
    30,000 $ 365,000
    75,000 $ 960,000
    135,000 $ 1,890,000

    o Company's assets and liabilities were approximately equal to their book values
    ost method.

    lue of equity acquired.


    Difference Schedule
    NCI Total
    20% 100%
    $ 840,000 $ 4,200,000

    $ 600,000 $ 3,000,000
    $ 126,000 $ 630,000
    $ 726,000 $ 3,630,000
    $ 114,000 $ 570,000
    $ (114,000) $ (570,000)
    $ - $ -

    statements workpaper on December 31, 2015.

    $ 59,500
    $ 3,360,000
    $ 840,000

    $ 570,000

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