On January 1, 2016, Parent Company Purchased 8,000 Shares of the Common

Essay

On January 1, 2016, Parent Company purchased 8,000 shares of the common stock of Subsidiary Company for $350,000.On this date, Subsidiary had 20,000 shares of $5 par common stock authorized, 10,000 shares issued and outstanding.Other paid-in capital and retained earnings were $150,000 and $200,000 respectively.On January 1, 2016, any excess of cost over book value is due to a patent, to be amortized over 15 years.Parent Company uses the simple equity method to account for its investment in Sub.
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Subsidiary's net income and dividends for two years were:
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$$\begin{array} { l r r } & 2016 & 2017 \\\text { Netincome } & \$ 50,000 & \$ 90,000 \\\text { Dividends } & 10,000 & 30,000\end{array}$$ On January 1, 2017, Subsidiary Company sold an additional 2,500 shares of common stock to non-controlling shareholders for $50 per share.
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In the last quarter of 2017, Subsidiary Company sold goods to Parent Company for $40,000.Subsidiary's usual gross profit on intercompany sales is 40%.On December 31, $7,500 of these goods are still in Parent's ending inventory.
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Required: Prepare the following items
a.Determination and distribution schedule effective 1/1/16
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b.Parent's journal entry to record change in ownership interest due to Sub's issuance of additional shares on 1/1/17.Support with schedule of Parent's ownership interest before and after the 1/1/17 issuance.?
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c.All necessary elimination entries necessary to prepare the consolidating worksheet on 12/31/17
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