Nama : Ikhsan Uiandra Putra Sitorus

NIM : 2301896803
Kelas : LC53

Workpaper Eliminating Entries, Equity Method

Kerjakan EXERCISE 4-3, Halaman 172, Presidio Company dan Succo Company.

EXERCISE 4‐3
Workpaper Eliminating Entries, Equity Method LO 5
At the beginning of 2014, Presidio Company purchased 95% of the common stock of Succo
Company for $494,000. On that date, Succo Company's stockholders' equity consisted of the
following:
Common stock $300,000
Other contributed Capital 100,000
Retained earnings 120,000 +
Total $520,000

During 2022, Succo Company reported net income of $40,000 and distributed dividends in
the amount of $19,000. Succo Company's retained earnings balance at the end of 2021
amounted to $160,000. Presidio Company uses the equity method.

Required:
Prepare in general journal form the workpaper entries necessary in the compilation of
consolidated financial statements on December 31, 2022. Explain why the partial and
complete equity methods would result in the same entries in this instance.
ANSWER :

Journal entry

Equity Income ($40,000 x 95%) $38,000

Investment in Succo Company $38,000

Investment in Succo Company ($19,000 x 95%) $18,050

Dividend Declared $18,050

Common Stock $300,000

Other Contributed Capital $100,000
Retained Earning (1/1/21) $160,000
Investment [($494,000 + (95% x ($160,000 – $120,000)] $532,000
Non Control Intertest [($520,000 x 5% + (5% x ($160,000 - $120,000)] $ 28,000

In this case, the partial and complete equity methods result in the same entry because the
amount paid for the acquisition of Succo is exactly 95% of Succo's book value.