Partner Company Acquired 85% of the Common Stock of Simplex

question 8

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, 2015, 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, 2016, 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 2015 and 2016 to account for its investment in Simplex Company.
B. Prepare the workpaper eliminating entries needed for a consolidated statements workpaper on December 31, 2016.

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Definitions:

Less Developed Sense

A sensory capability that is underdeveloped or less acute compared to other senses in an individual or species.

Olfaction

The sense of smell, a chemical sensing system that allows the detection and identification of odors in the environment.

Vision Perceiving

The ability to interpret and make sense of visual stimuli in the environment through the process of sight.

Kinesthetic

Kinesthetic relates to the perception of body movements and position, often referred to as muscle memory or the sense of body awareness.