Question

I just Don't understand part b

Exercise 4-9

On October 1, 2015, Para Company purchased 90% of the outstanding common stock of Star Company for $229,200. Additional data concerning Star Company for 2015 follows:

Common stock		$76,500
Other contributed capital		29,900
Retained earnings, 1/1		72,100
Net income		55,800
Dividends declared and paid (12/15)		10,400

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)

	Your answer is correct.

Prepare on Para Company’s 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)

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Attempts: 3 of 3 used

(b)

	Your answer is partially correct. Try again.

Prepare workpaper eliminating entries for a workpaper on December 31, 2015. Star Company’s net income is earned evenly throughout the year. (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. Round answers to 0 decimal places, e.g. 5,125.)

Account Titles and Explanation	Debit	Credit
(To record equity income (loss) and dividend income)
(To eliminate investment in subsidiary and create noncontrolling interest)
(To eliminate excess of the book value of equity acquired.)

Answer 1

a.

Investment in Star	229200
To cash		229200
Investment in Star	50220
To income from star		50220
Cash	9360
To investment in Star		9360

b.

Eliminating entries
Income from star	50220
Share of NCI in income	5580
To dividends		10400
To investment in Star		40860
To NCI in NA		4540
Common stock	76500
Other contributed capital	29900
Retained earnings	72100
To investment in Star		160650
To NCI in NA		17850
Goodwill	76167
To investment in Star		68550
To NCI in NA		7617

Purchase price 90%	229200	229200
NCI	25466.67	=229200/0.9*0.1
Net asset book value	178500
Goodwill	76166.67