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Advanced Accounting

- 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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240 views

Advanced Accounting

- 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.

Uploaded by

gisela gilberta
Copyright
© © All Rights Reserved
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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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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