Journal entries (investment in previously unissued stock)
The stockholders’ equity of Tal Corporation at December 31, 2011, was $380,000, consisting of the following (in thousands):
|
Capital stock, $10 par (24,000 shares outstanding) |
$240 |
|
Additional paid in capital |
60 |
|
Retained earnings |
80 |
|
Total stockholders’ equity |
$380 |
On January 1, 2012, Tal Corporation, which was in a tight working capital position, sold 12,000 shares of previously unissued stock to Riv Corporation for $250,000. All of Tal’s identifiable assets and liabilities were recorded at fair values on this date except for a building with a 10 year remaining useful life that was undervalued by $60,000. During 2012, Tal Corporation reported net income of $120,000 and paid dividends of $90,000.
REQUIRED : Prepare all journal entries necessary for Riv Corporation to account for its investment in Tal for 2012.