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On October 1, 2015, Para Company purchased 90% of the outstanding common stock of Star...

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Accounting

On October 1, 2015, Para Company purchased 90% of the outstanding common stock of Star Company for $202,700. Additional data concerning Star Company for 2015 follows:
Common stock $65,500
Other contributed capital 28,700
Retained earnings, 1/1 76,100
Net income 57,000
Dividends declared and paid (12/15) 10,300
Any difference between book value and the value implied by the purchase price relates to goodwill. Para Company uses the partial equity method to record its investment in Star Company.

(a)

Prepare on Para Companys books journal entries to record the investment-related activities for 2015. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

(To record investment in subsidiary)

(To account for prorated stake in equity)

(To account for reduction in equity due to dividends)

Answer & Explanation Solved by verified expert
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