Pamela Company Acquired 80% of the Outstanding Common Stock of Silt

Essay

Pamela Company acquired 80% of the outstanding common stock of Silt Company on January 1, 2014, for $396,000. At the date of purchase, Silt Company had a balance in its $2 par value common stock account of $360,000 and retained earnings of $90,000. On January 1, 2016, Silt Company issued 45,000 shares of its previously unissued stock to noncontrolling stockholders for $3 per share. On this date, Silt Company had a retained earnings balance of $152,000. The difference between cost and book value relates to subsidiary land. No dividends were paid in 2016. Silt Company reported income of $30,000 in 2016.
Required:
A. Prepare the journal entry on Pamela's books to record the effect of the issuance assuming the equity method.
B. Prepare the eliminating entries needed for the preparation of a consolidated statements workpaper on December 31, 2016, assuming the equity method.