Partner Company Acquired 85% of the Common Stock of Simplex

question 6

Essay

Partner Company acquired 85% of the common stock of Simplex Company in two separate cash transactions.The first purchase of 108,000 shares (60%) on January 1, 2012, cost $735,000.The second purchase, one year later, of 45,000 shares (25%) cost $330,000.Simplex Company's stockholders' equity was as follows:
On April 1, 2013, after a significant rise in the market price of Simplex Company's stock, Partner Company sold 32,400 of its Simplex Company shares for $390,000.Simplex Company notified Partner Company that its net income for the first three months was $22,000.The shares sold were identified as those obtained in the first purchase.Any difference between cost and book value relates to goodwill.Partner uses the partial equity method to account for its investment in Simplex Company.
Required:
A.Prepare the journal entries Partner Company will make on its books during 2012 and 2013 to account for its investment in Simplex Company.
B.Prepare the workpaper eliminating entries needed for a consolidated statements workpaper on December 31, 2013.

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Definitions:

Prosocial Behavior

Refers to voluntary actions aimed at helping others, including behaviors like sharing, comforting, or rescuing.

Physical Conflict

A confrontation involving bodily force between individuals or groups.

Aggression

Behavior intended to harm or intimidate others, manifested either physically or verbally.

Moral Reasoning

The process of determining right or wrong in ethical situations, often involving complex thought and the consideration of ethical principles.