Stick Corporation is a wholly owned subsidiary of Point Corporation. Point acquired ownership of Stick on January 1, 20X3, for $28,000 above Stick's reported net assets. At that date, Stick reported common stock outstanding of $60,000 and retained earnings of $90,000. The differential is assigned to equipment with an economic life of seven years at the date of the business combination. Stick reported net income of $30,000 and paid dividends of $12,000 in 20X3. Required: a. Prepare the journal entries recorded by Point Corporation during 20X3 on its books if Point accounts for its investment in Stick using the equity method.
Stick Corporation is a wholly owned subsidiary of Point Corporation. Point acquired ownership of Stick on January 1, 20X3, for $28,000 above Stick's reported net assets. At that date, Stick reported common stock outstanding of $60,000 and retained earnings of $90,000. The differential is assigned to equipment with an economic life of seven years at the date of the business combination. Stick reported net income of $30,000 and paid dividends of $12,000 in 20X3. Required: a. Prepare the journal entries recorded by Point Corporation during 20X3 on its books if Point accounts for its investment in Stick using the equity method.
Chapter7: Corporations: Reorganizations
Section: Chapter Questions
Problem 43P
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Transcribed Image Text:Stick Corporation is a wholly owned subsidiary of Point Corporation. Point acquired ownership of Stick on January 1, 20X3, for $28,000
above Stick's reported net assets. At that date, Stick reported common stock outstanding of $60,000 and retained earnings of
$90,000. The differential is assigned to equipment with an economic life of seven years at the date of the business combination. Stick
reported net income of $30,000 and paid dividends of $12,000 in 20X3.
Required:
a. Prepare the journal entries recorded by Point Corporation during 20X3 on its books if Point accounts for its investment in Stick
using the equity method.
b. Prepare the consolidating entries needed at December 31, 20X3, to prepare consolidated financial statements.
Complete this question by entering your answers in the tabs below.
Required A Required B
Prepare the journal entries recorded by Point Corporation during 20X3 on its books if Point accounts for its investment in Stick using the
equity method.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
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Journal entry worksheet
A
B C D
Record the initial investment in Stick Corporation
Note: Enter debits before credits.
Event
1
General Journal
Debit
Credit
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