On January 1 2014 Plum Company made an open market

purchase #6367
On January 1, 2014, Plum Company made an open-market purchase of 30,000 shares of
Spivey Company common stock for $122,000. At that time, Spivey Company had common
stock ($2 par) of $600,000 and retained earnings of $240,000. On July 1, 2014, an additional
210,000 shares were purchased on the open market by PlumCompany at a cost of $789,600 or
$3.76 a share. On November 1, 2014, 3,000 of the shares purchased on January 1, 2014, were
sold on the open market for $21,000. Assume that any excess of implied value over book value
acquired relates to subsidiary goodwill.During 2014, Plum Company earned $22,000 (excluding
any gain or loss on the sale of the shares). Plum Company received income statements from
Spivey Company reporting the following results.....................................................Spivey
Company IncomeJanuary 1, 2014 to June 30, 2014 .......................$ 60,000January 1, 2014 to
October 31, 2014 .....................96,000For the year ended December 31, 2014
................130,000Neither company declared dividends during the year. Plum Company's
retained earnings were $460,000 on January 1, 2014.Required:A. Prepare the book entries
Plum Company would make during 2014 to account for its investment in Spivey Company,
assuming(1) The use of the cost method.(2) The use of either the complete or the partial equity
method.B. Prepare in general journal form the eliminating entries for a consolidated statements
work paper on December 31, 2014, assuming(1) The use of the cost method.(2) The use of
either the complete or the partial equity method.C. Compute controlling interest in consolidated
net income for 2014.View Solution:
On January 1 2014 Plum Company made an open market purchase

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