Polk Company owned 24,000 of the 30,000 outstanding common shares of Sloan Compa
ID: 2458589 • Letter: P
Question
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 Polk Company purchased all 7,500 shares, the book entry to record the purchase should increase the Investment in Sloan Company account by a.$562,500. b.$590,625. c.$675,000. d.$150,000. e. Some other account.
Explanation / Answer
The purchase price is taken into consideration for the calculation of the investments and to be shown at purchase price.