Question
In: Accounting
On January 1, 2020, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company...
On January 1, 2020, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,316,700 in cash. The price paid was proportionate to Sellinger’s total fair value, although at the acquisition date, Sellinger had a total book value of $1,580,000. All assets acquired and liabilities assumed had fair values equal to book values except for a patent (six-year remaining life) that was undervalued on Sellinger’s accounting records by $291,000. On January 1, 2021, Palka acquired an additional 25 percent common stock equity interest in Sellinger Company for $513,125 in cash. On its internal records, Palka uses the equity method to account for its shares of Sellinger.
During the two years following the acquisition, Sellinger reported the following net income and dividends:
| 2020 | 2021 | |||||
| Net income | $ | 440,000 | $ | 547,000 | ||
| Dividends declared | 180,000 | 220,000 | ||||
a) Show Palka’s journal entry to record its January 1, 2021, acquisition of an additional 25 percent ownership of Sellinger Company shares.
b) Prepare a schedule showing Palka’s December 31, 2021, equity method balance for its Investment in Sellinger account.
Solutions
ekkarill92 answered 2 years agoRelated Solutions
On January 1, 2020, Palka, Inc., acquired 70% of the outstanding shares of Sellinger Company for...
On January 1, 2020, Palka, Inc., acquired 70% of the outstanding
shares of Sellinger Company for $1,290,800 in cash. The price paid
was proportionate to Sellinger’s total fair value, although at the
acquisition date, Sellinger had a total book value of $1,570,000.
All assets acquired and liabilities assumed had fair values equal
to book values except for a patent (six-year remaining life) that
was undervalued on Sellinger’s accounting records by $264,000. On
January 1, 2021. Palka acquired an additional 25%...
On January 1, 2014, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company...
On January 1, 2014, Palka, Inc., acquired 70 percent of the
outstanding shares of Sellinger Company for $1,290,800 in cash. The
price paid was proportionate to Sellinger’s total fair value,
although at the acquisition date, Sellinger had a total book value
of $1,570,000. All assets acquired and liabilities assumed had fair
values equal to book values except for a patent (six-year remaining
life) that was undervalued on Sellinger’s accounting records by
$264,000. On January 1, 2015, Palka acquired an additional...
On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company...
On January 1, 2017, Palka, Inc., acquired 70 percent of the
outstanding shares of Sellinger Company for $1,625,400 in cash. The
price paid was proportionate to Sellinger’s total fair value,
although at the acquisition date, Sellinger had a total book value
of $2,060,000. All assets acquired and liabilities assumed had fair
values equal to book values except for a patent (six-year remaining
life) that was undervalued on Sellinger’s accounting records by
$252,000. On January 1, 2018, Palka acquired an additional...
On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company...
On January 1, 2017, Palka, Inc., acquired 70 percent of the
outstanding shares of Sellinger Company for $1,274,000 in cash. The
price paid was proportionate to Sellinger’s total fair value,
although at the acquisition date, Sellinger had a total book value
of $1,540,000. All assets acquired and liabilities assumed had fair
values equal to book values except for a patent (six-year remaining
life) that was undervalued on Sellinger’s accounting records by
$270,000. On January 1, 2018, Palka acquired an additional...
On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company...
On January 1, 2017,
Palka, Inc., acquired 70 percent of the outstanding shares of
Sellinger Company for $1,392,300 in cash. The price paid was
proportionate to Sellinger’s total fair value, although at the
acquisition date, Sellinger had a total book value of $1,700,000.
All assets acquired and liabilities assumed had fair values equal
to book values except for a patent (six-year remaining life) that
was undervalued on Sellinger’s accounting records by $279,000. On
January 1, 2018, Palka acquired an additional...
On January 1, 2020, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing,...
On January 1, 2020, Corgan Company acquired 70 percent of the
outstanding voting stock of Smashing, Inc., for a total of
$1,435,000 in cash and other consideration. At the acquisition
date, Smashing had common stock of $920,000, retained earnings of
$470,000, and a noncontrolling interest fair value of $615,000.
Corgan attributed the excess of fair value over Smashing's book
value to various covenants with a 20-year remaining life. Corgan
uses the equity method to account for its investment in
Smashing....
On January 1, 2020, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing,...
On January 1, 2020, Corgan Company acquired 70 percent of the
outstanding voting stock of Smashing, Inc., for a total of $910,000
in cash and other consideration. At the acquisition date, Smashing
had common stock of $770,000, retained earnings of $320,000, and a
noncontrolling interest fair value of $390,000. Corgan attributed
the excess of fair value over Smashing's book value to various
covenants with a 20-year remaining life. Corgan uses the equity
method to account for its investment in Smashing....
On January 1, 2020, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing,...
On January 1, 2020, Corgan Company acquired 70 percent of the
outstanding voting stock of Smashing, Inc., for a total of
$1,225,000 in cash and other consideration. At the acquisition
date, Smashing had common stock of $860,000, retained earnings of
$410,000, and a noncontrolling interest fair value of $525,000.
Corgan attributed the excess of fair value over Smashing's book
value to various covenants with a 20-year remaining life. Corgan
uses the equity method to account for its investment in
Smashing....
On January 1, 2020, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing,...
On January 1, 2020, Corgan Company acquired 70 percent of the
outstanding voting stock of Smashing, Inc., for a total of
$1,505,000 in cash and other consideration. At the acquisition
date, Smashing had common stock of $940,000, retained earnings of
$490,000, and a noncontrolling interest fair value of $645,000.
Corgan attributed the excess of fair value over Smashing's book
value to various covenants with a 20-year remaining life. Corgan
uses the equity method to account for its investment in Smashing....
n January 1, 2020, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing,...
n January 1, 2020, Corgan Company acquired 70 percent of the
outstanding voting stock of Smashing, Inc., for a total of
$1,155,000 in cash and other consideration. At the acquisition
date, Smashing had common stock of $840,000, retained earnings of
$390,000, and a noncontrolling interest fair value of $495,000.
Corgan attributed the excess of fair value over Smashing's book
value to various covenants with a 20-year remaining life. Corgan
uses the equity method to account for its investment in
Smashing....
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