Pat Corporation owned a 90 percent interest in Saw Corporation, and during 2010 the following changes occurred in Saw’s equity and Pat’s investment in Saw (in thousands):
| Saw’s Stockholders’ Equity | Goodwill | Investment in Saw (90%) |
Balance, January 1, 2010 | $1,000 | $49.5 | $ 949.5 |
Income—2010 | 250 | — | 225 |
Dividends—2010 | (150) | — | (135) |
Balance, December 31, 2010 | $1,100 | $49.5 | $1,039.5 |
During 2011, Saw’s net income was $280,000, and it declared $40,000 dividends each quarter of the year.
Pat reduced its interest in Saw to 80 percent on July 1, 2011, by selling Saw shares for $120,000.
REQUIRED
1. Prepare the journal entry on Pat’s books to record the sale of Saw shares as of the actual date of sale.
2. Prepare the journal entry on Pat’s books to record the sale of shares as of January 1, 2011.
3. Prepare a schedule to reconcile the answers to parts 1 and 2.
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