On January 1 2013 Purdy Company acquired 84 of the

#6368
On January 1, 2013, Purdy Company acquired 84% of the capital stock of Sally Company for
$840,000. On that date, Sally Company's stockholders' equity was:Capital Stock, $20 par
...........................$600,000Other Contributed Capital ........................200,000Retained Earnings
..................................160,000Total ................................................$960,000The difference
between implied and book values relates to land owned by Sally Company.On January 2, 2015,
Sally Company issued 6,000 shares of its authorized capital stock, with a market value of $55
per share, to Marcy Smith in exchange for a patent. Sally Company's retained earnings balance
on this date was $400,000, capital stock and other contributed capital balances had not
changed during 2013 and 2014.Required:A. Prepare (1) the entry on Purdy's books to record
the effect of the issuance, and (2) the elimination entries for the preparation of a consolidated
balance sheet work paper immediately after the new issue of shares assuming use of the cost
method.B. Assuming that the market value of the new shares issued was $34 per share, repeat
requirement A above.View Solution:
On January 1 2013 Purdy Company acquired 84 of the

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