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Exercise 2 (LO 2) Subsidiary sale of shares to noncontrolling interest. Truck Company owns a...

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Accounting

Exercise 2 (LO 2) Subsidiary sale of shares to noncontrolling interest.

Truck Company owns a 90% interest in Trailer Company on January 1, 2015, when Trail has the following stockholders equity:

Common stock ($10 par)

$100,000

Paid-in capital in excess of par

250,000

Retained earnings

200,000

Total stockholders equity

$550,000

The investment is purchased for book value, $495,000.

On July 1, 2015, Trail sells 2,000 additional shares to noncontrolling shareholders in a private offering for $75 per share. Trailers net income for 2015 is $70,000, and the income is earned evenly during the year.

Truck uses the simple equity method to record the investment in Trailer. Summary entries are made each December 31 to record the years activity.

Prepare Trucks equity adjustments for 2015 that result from the above activities of Trailer Company during 2011. Assume Truck has $500,000 of paid-in capital in excess of par.

If handwriting the answer, please write legibly. Thank you.

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