Problem

Pet Corporation owns 100 percent (300,000 shares) of the outstanding shares of Sap Corpora...

Pet Corporation owns 100 percent (300,000 shares) of the outstanding shares of Sap Corporation’s common stock on January 1, 2011. Its Investment in Sap account on this date is $4,400,000, equal to Sap’s $4,000,000 stockholders’ equity plus $400,000 goodwill. During 2011, Sap reports net income of $600,000 and pays no dividends.

On April 1, 2011, Pet sells a 15 percent interest (45,000 shares) in Sap for $750,000, thereby reducing its holdings to 85 percent.

REQUIRED: Prepare the journal entries needed for Pet to account for its investment in Sap for 2011, using a beginning-of-the-period sales assumption.

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Solutions For Problems in Chapter 8