9.On January 1, 2006, Patterson Corporation purchased 24,000 of the 30,000 outst
ID: 2458611 • Letter: 9
Question
9.On January 1, 2006, Patterson Corporation purchased 24,000 of the 30,000 outstanding common shares of Stewart Company for $1,140,000. On January 1, 2010, Patterson Corporation sold 3,000 of its shares of Stewart Company on the open market for $90 per share. Stewart Company’s stockholders’ equity on January 1, 2006, and January 1, 2010, was as follows:
1/1/061/1/10
Common stock, $10 par value$ 300,000$ 300,000
Other contributed capital300,000300,000
Retained earnings 600,000 1,050,000
$1,200,000$1,650,000
The difference between implied and book value is assigned to Stewart Company’s land. As a result of the sale, Patterson Corporation’s Investment in Stewart account should be credited for
a.$165,000.
b.$206,250.
c.$120,000.
d.$142,500.
e.None of these.
10.On January 1, 2006, Peterson Company purchased 16,000 of the 20,000 outstanding common shares of Swift Company for $760,000. On January 1, 2010, Peterson Company sold 2,000 of its shares of Swift Company on the open market for $90 per share. Swift Company’s stockholders’ equity on January 1, 2006, and January 1, 2010, was as follows:
1/1/061/1/10
Common stock, $10 par value$200,000$ 200,000
Other contributed capital200,000200,000
Retained earnings 400,000 700,000
$800,000$1,100,000
The difference between implied and book value is assigned to Swift Company’s land. Assuming no other equity transactions, the amount of the difference between implied and book value that would be added to land on a workpaper for the preparation of consolidated statements on December 31, 2010, would be
a.$120,000.
b.$115,000.
c.$105,000.
d.$84,000.
e.None of these.
Explanation / Answer
9.On January 1, 2006, Patterson Corporation purchased 24,000 of the 30,000 outst
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