E 8-13 Computations and entries (subsidiary issues additional shares to outside entities)

Pop Corporation paid $1,800,000 for 90,000 shares of Son Company’s 100,000 outstanding shares on January 1, 2016, when Son’s equity consisted of $1,000,000 of $10 par common stock and $500,000 retained earnings. The excess fair 292 CHAPTER 8 value over book value was goodwill. On January 2, 2018, Son sold an additional 20,000 shares to the public for $600,000, and its equity before and after issuance of the additional 20,000 shares was as follows (in thousands):

January 1, 2018

(Before Issuance)

January 2, 2018

(After Issuance)

$10 par common stock $1,000 $1,200 Additional paid-in capital — 400 Retained earnings 800 800 Total stockholders’ equity $1,800 $2,400 REQuIRED 1. Determine Pop’s Investment in Son account balance on January 1, 2018.

2. Prepare the entry on Pop’s books to account for its decreased ownership interest if gain or loss is not recognized.

p R O B L E M S