Response to the following problem:
The accounts of Pyle Company and its subsidiary, Stern Company, are summarized below as of December 31, 2014:
| Debits |
|
Pyle |
|
Stern |
| Current Assets |
|
$605,700 |
|
$329,000 |
| Investment in Stern Company |
|
479,000 |
|
|
| Other Assets |
|
1,185,000 |
|
664,000 |
| Dividends Declared, 11/1 |
|
84,000 |
|
60,000 |
|
|
$2,353,700 |
|
$1,053,000 |
| Credits |
|
|
|
|
| Liabilities |
|
$187,000 |
|
$87,000 |
| Common Stock, $5 par |
|
500,000 |
|
300,000 |
| Other Contributed Capital |
|
234,000 |
|
180,000 |
| 1/1 Retained Earnings |
|
1,194,000 |
|
279,000 |
| Net Income |
|
238,700 |
|
207,000 |
|
|
$2,353,700 |
|
$1,053,000 |
Pyle Company made the following open-market purchase and sale of Stern Company common stock:
January 2, 2012, purchased 51,000 shares (85% of Stern), cost $510,000, $10/share;
January 1, 2014 sold 40,000 shares (two-thirds of Stern), proceeds, $480,000, $12/share.
The book value of Stern Company's net assets on January 2, 2012, $600,000, approximated the fair value of those net assets, including retained earnings of $121,000. Subsequent changes in book value of the net assets are entirely attributable to earnings of Stern Company. Stern Company earns its income evenly throughout the year.
Prepare the journal entries needed on Pyle Company's books to record the transactions regarding the investment in Stern Company account assuming that the cost method is used to account for the investment.