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:

Nations

Large groups of people united by common descent, history, culture, or language, inhabiting a particular country or territory.

Comparable Worth

A concept in workplace equality that argues for equal pay for jobs of equal value, considering skills, effort, responsibility, and working conditions.

Equal Pay

Equal Pay refers to the policy or practice of compensating employees equally for the same or substantially similar work, regardless of gender, race, or other irrelevant factors.

Working Conditions

The environment and factors affecting labor, including hours, safety, physical conditions, and rights in the workplace.