Sale of partial, then balance of interest. On January 1, 20X3, Cipher Corporation purchases 90% (18,000 shares) of the outstanding common stock of Doer Company for $495,000. Just prior to Cipher Corporation's purchase, Doer Company has the following stockholders' equity:
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Common stock ($5 par)
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$100,000
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Paid-in capital in excess of par
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300,000
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Retained earnings
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100,000
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Total stockholders' equity
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$500,000
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At this time, Doer Company's book values approximate fair values except for buildings with a 20-year life.
On January 1, 20X7, Doer Company's retained earnings balance amounts to $200,000. No changes have taken place in the paid-in capital in excess of par accounts since the original sale of common stock on July 10, 20X0.
On July 1, 20X7, Cipher Corporation sells 2,000 of its Doer Company shares to Tower Corporation for $80,000. At the time of this sale, Cipher has no intention of selling the balance of its holding in Doer Company.
In an unexpected move on December 31, 20X7, Cipher Corporation sells its remaining 80% interest in Doer Company to Tower Corporation for $500,000.
Doer Company's reported income and dividends for 20X7 are as follows:
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Income
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Dividends
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January 1, 20X7-July 1, 20X7
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$25,000
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$0.50/share
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July 1, 20X7-December 31, 20X7
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35,000
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0.50/share
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Required
Prepare the determination and distribution of excess schedule for Cipher Corporation's pur- chase of Doer Company common stock on January 1, 20X3. Then, prepare all the entries on Cipher's books needed to re?ect the changes in its investment account from January 1, 20X7, to December 31, 20X7. (Assume Cipher uses the cost method to report its investment in Doer Company.)