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

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:
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?