S Company had 12,000 shares of $20 par value common stock outstanding during the entire period. S had the following retained earnings balances on the relevant dates:
January 1, 2009 $ 90,000
January 1, 2010 30,000
January 1, 2011 150,000
December 31, 2011 300,000
S Company declared no dividends in 2009 or 2010 but did declare $60,000 of dividends in 2011. Any difference between cost and book value is assigned to subsidiary land. P uses the equity method to account for its investment in S.
Required:
A. Prepare the journal entries P Company will make during 2010 and 2011 to account for its investment in S Company.
B. Prepare workpaper eliminating entries necessary to prepare a consolidated statements workpaper on December 31, 2011.