Subsidiary Stock Dividend
Lake Company reported the following summarized balance sheet data as of December 31, 20X2:
Cash Accounts Receivable Inventory Buildings and Equipment Less: Accumulated Depreciation | $ 30,000 80,000 90,000 270,000 (120,000) | Accounts Payable Common Stock Retained Earnings | $ 50,000 100,000 200,000 |
Total Assets | $350,000 | Total Liabilities and Equities | $350,000 |
Lake issues 4,000 additional shares of its $10 par value stock to its shareholders as a stock dividend on April 20, 20X3. The market price of Lake’s shares at the time of the stock dividend is $40.
Lake reports net income of $25,000 and pays a $10,000 cash dividend in 20X3. Lindale Company acquired 70 percent of Lake’s common shares at book value on January 1, 20X1. At that date, the fair value of the noncontrolling interest was equal to 30 percent of the book value of Lake Company. Lindale uses the basic equity method in accounting for its investment in Lake.
Required
a. Give the journal entries recorded by Lake and Lindale at the time the stock dividend is declared and distributed.
b. Give the worksheet elimination entries needed to prepare consolidated financial statements for 20X3.
c. Give the worksheet elimination entry needed to prepare a consolidated balance sheet on January 1,20X4.
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