(Answered) Question - pizza company purchased salt company common

Accounting

Question - Pizza Company purchased Salt Company common stock through open-market purchases as follows:

Date 1/1/12 1/1/13 1/1/14

Acquired Shares

1,500 3,300 6,600

Cost $ 50,00 $ 90,000 $250,000

Salt Company had 12,000 shares of $20 par value common stock outstanding during the entire period. Salt had the following retained earnings balances on the relevant dates:

January 1, 2012 January 1, 2013 January 1, 2014 December 31, 2014

$ 90,000 30,000 150,000 300,000

Salt Company declared no dividends in 2012 or 2013 but did declare $60,000 of dividends in 2014. Any difference between cost and book value is assigned to subsidiary land. Pizza uses the equity method to account for its investment in Salt.

Required:

A. Prepare the journal entries Pizza Company will make during 2013 and 2014 to account for its investment in Salt Company.

B. Prepare workpaper eliminating entries necessary to prepare a consolidated statements workpaper on December 31, 2014.

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