2009 any difference between cost and book value is

2009. Any difference between cost and book value is assigned to subsidiary land. Peete uses the
equity method to account for its investment in Sikes.
Required :
A. Prepare the journal entries Peete Company will make during 2008 and 2009 to account for its
investment in Sikes Company.
B. Prepare workpaper eliminating entries necessary to prepare a consolidated statements
workpaper on December 31, 2009.
8-2 On January 1, 2006, Payne Company acquired 90% of the common stock of Shea Company for
$650,000. At that time, Shea had common stock ($5 par) of $500,000 and retained earnings of
$200,000.
On January 1, 2008, Shea issued 20,000 shares of its unissued common stock, with a market value
of $7 per share, to noncontrolling stockholders. Shea’s retained earnings balance on this date was
$300,000. Any difference between cost and book value relates to Shea’s land. No dividends were
declared in 2008.
Required :
A. Prepare the entry on Payne’s books to record the effect of the issuance assuming the cost
method.
B. Prepare the elimination entries for the preparation of a consolidated statements workpaper on
December 31, 2008 assuming the cost method.
8-6

Chapter 8 Changes in Ownership Interest
8-3 Pryor Company purchased 30,000 shares of Silva Company’s common stock for $645,000 on
January 1, 2008. At that time Silva Company had $375,000 of $10 par value common stock and
$225,000 of retained earnings. Silva Company’s income earned and increase in retained earnings
during 2008 and 2009 were:
2008 2009
Income earned $195,000 $270,000
Increase in Retained Earnings 150,000 225,000
Silva Company income is earned evenly throughout the year.
On September 1, 2009, Pryor Company sold on the open market, 9,000 shares of its Silva Company
stock for $345,000. Any difference between cost and book value relates to Silva Company land.
Pryor Company uses the cost method to account for its investment in Silva Company.
Required :
A. Compute Pryor Company’s reported gain (loss) on the sale.
B. Prepare all consolidated statements workpaper eliminating entries for a workpaper on
December 31, 2009.
8.4 Pool made the following purchases of Stahl Company common stock:
Date Shares Cost
1/1/08 70,000 (70%) $1,000,000
1/1/09 10,000 (10%) 160,000
Stockholders’ equity information for Stahl Company for 2008 and 2009 follows:
2008 2009
Common stock, $10 par value $1,000,000 $1,000,000
1/1 Retained earnings 300,000 380,000
Net income 110,000 140,000
Dividends declared, 12/15 (30,000 ) (40,000 )
Retained earnings, 12/31 380,000 480,000
Total stockholders’ equity, 12/31 $1,380,000 $1,480,000
On July 1, 2009, Pool sold 14,000 shares of Stahl Company common stock on the open market for
$22 per share. The shares sold were purchased on 1/1/08.Stahl notified Pool that its net income for
the first six months was $70,000. Any difference between cost and book value relates to subsidiary
land. Pool uses the cost method to account for its investment in Stahl Company.
Required:
A. Prepare the journal entry made by Pool to record the sale of the 14,000 shares on July 1, 2009.
B. Prepare the workpaper eliminating entries needed for a consolidated statements workpaper on
December 31, 2009.
C. Compute the amount of noncontrolling interest that would be reported on the consolidated
balance sheet on December 31, 2009.