On January 1,2014,Peabody Corporation Acquired a 90% Interest in Salisbury

Essay

On January 1,2014,Peabody Corporation acquired a 90% interest in Salisbury Company for $270,000 when Salisbury's stockholders' equity was $300,000; with Common stock $200,000 and Retained earnings $100,000.
On January 1,2014,Salisbury purchased a 10% interest in Peabody for $70,000 when Peabody's total stockholders' equity was $700,000; with Common stock $500,000 and Retained earnings $200,000.
The following data was available for the year ending December 31,2014:
$\begin{array}{lrr} &\text {Peabody Company}& \text {Salisbury Company}\\ \text {Net income } &\$50,000&\$30,000\\ \text { Dividends} &0&0\\\end{array}$
Use the conventional approach to account for the mutually-held stock.Assume there were no book value/fair value differentials for each investment.The separate net incomes do not include investment income.
Required:
1.Prepare the journal entry for Peabody on January 1,2014.
2.Prepare the journal entry for Salisbury on January 1,2014.
3.Prepare the journal entry to record the constructive retirement of 10% of Peabody's outstanding stock due to Salisbury's purchase of Peabody's stock.
4.Determine the incomes of Peabody and Salisbury on a consolidated basis with mutual income for 2014 using simultaneous equations.
5.What is controlling interest share of consolidated net income and noncontrolling interest shares for 2014?