7.Polk Company owned 24,000 of the 30,000 outstanding common shares of Sloan Com

Question

7.Polk Company owned 24,000 of the 30,000 outstanding common shares of Sloan Company on January 1, 2010. Polk’s shares were purchased at book value when the fair values of Sloan’s assets and liabilities were equal to their book values. The stockholders’ equity of Sloan Company on January 1, 2010, consisted of the following: Common stock, $15 par value$ 450,000 Other contributed capital337,500 Retained earnings 712,500 Total$1,500,000

Sloan Company sold 7,500 additional shares of common stock for $90 per share on January 2, 2010. If all 7,500 shares were sold to noncontrolling stockholders, the workpaper adjustment needed each time a workpaper is prepared should increase (decrease) the Investment in Sloan Company by

a.($140,625).

b.$140,625.

c.($112,500).

d.$192,000.

e.None of these.

Explanation / Answer

Ans:

d. ($112,500).

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