EXERCISE 4-5 Eliminating Entries, Noncontrolling Interest LO 2

On January 1, 2014, Plate Company purchased a 90% interest in the common stock of Set Company for $650,000, an amount $20,000 in excess of the book value of equity acquired. The excess relates to the understatement of Set Company’s land holdings.

B. Prepare the eliminating entries required for the preparation of a consolidated statements workpaper on December 31, 2014, assuming the use of the equity method.

Excerpts from the consolidated retained earnings section of the consolidated statements workpaper for the year ended December 31, 2014, follow:

Set Company Consolidated Balances

1/1/14 retained earnings 190,000 880,000

Net income from above 132,000 420,000

Dividends declared (50,000) (88,000)

12/31/14 retained earnings to the balance sheet 272,000 1,212,000

Set Company’s stockholders’ equity is composed of common stock and retained earnings only.