Basic Consolidation Entries for Majority-Owned Subsidiary
Farmstead Company reported the following summarized balance sheet data on December 31, 20X8:
Assets | $350,000 | Account Payable | $ 50,000 |
|
| Common Stock | 100,000 |
|
| Retained Earnings | 200,000 |
Total | $350,000 | Total | $350,000 |
On January 1, 20X9, Horrigan Corporation acquired 70 percent of Farmstead’s stock for $210,000, the book value of the shares acquired. At that date the fair value of the noncontrolling interest was equal to 30 percent of the book value of Farmstead. Farmstead reported net income of $20,000 for 20X9 and paid dividends of $5,000.
Required
a. Give the equity-method journal entries recorded by Horrigan on its books during 20X9 related to its ownership of Farmstead.
b. Give the eliminating entries needed on December 31, 20X9, to prepare consolidated financial statements.
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