Exercise 4-5 On January 1, 2014, Plate Company purchased a 90% interest in the c

Question

Exercise 4-5 On January 1, 2014, Plate Company purchased a 90% interest in the common stock of Set Company for $602,270, an amount $21,500 in excess of the book value of equity acquired. The excess relates to the understatement of Set Company's land holdings Excerpts from the consolidated retained earnings section of the consolidated statements workpaper for the year ended December 31, 2014, follow: Consolidated Balances 1/1/14 retained earnings Net income from above Dividends declared 12/31/14 retained earnings to the balance sheet Set Company 179,700 125,600 (51,400) 253,900 855,900 400,000 1,176,200 Set Company's stockholders' equity is composed of common stock and retained earnings only.

Explanation / Answer

1 Set Company 46260 To Dividend Income 46260 (Being dividend income received from Set Company 51400*90/100) 2 Share capital of Set company 602270 Dividend Income 46260 Set Company 46260 Investment in Set Company 602270 3 Capital reserve 21500 Land 21500

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