Question

Exercise 3-2 On January 1, 2014, Polo Company purchased 100% of the common stock of Save Company by issuing 42,060 shares of its (Polo’s) $10 par value common stock with a market price of $18.10 per share. Polo incurred cash expenses of $18,210 for registering and issuing the common stock. The stockholders’ equity section of the two companies’ balance sheets on December 31, 2013, were: Polo Save Common stock, $10 par value $325,900 $291,030 Other contributed capital 630,640 173,360 Retained earnings 389,630 296,896

(a) Prepare the journal entry on the books of Polo Company to record the purchase of the common stock of Save Company and related expenses. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit (b) Prepare the elimination entry required for the preparation of a consolidated balance sheet workpaper on the date of acquisition.

Answer 1

	Account Titles and Explanation	Debit	Credit
(a)	Investment	761,286		(42,060 x $18.10)
	Common Stock		420,600	(42,060 x $10)
	Contributed Capital		322,476	balance
	Cash		18,210
(b)	Common Stock	291,030
	Contributed Capital	173,360
	Retained Earnings	296,896
	Investment		761,286