1. On January 1, 20X1, Peter Company acquires an 80% interest in Sardine Company by issuing 10,000 shares of its common stock with a par value of $10 per share and a fair value of $72 per share. At the time of the purchase, Sardine has the following balance sheet:

Assets Liabilities and Equity____________

Current assets $100,000 Current liabilities $ 80,000

Investments 150,000 Bonds payable 250,000

Land 120,000 Common stock ($10 Par) 100,000

Building (net) 350,000 Paid-in-Capital 200,000

Equipment 160,000 Retained earnings 250,000

Total assets $880,000 Total liab. & equity $880,000

Appraisals indicate that book values are representative of fair values with the exception of land and buildings. The land has a fair value of $190,000, and the building is appraised at $450,000. The building has an estimated remaining life of 20 years. Any remaining excess is goodwill.

The following summary of Sardines retained earnings applies to 20X1 and 20X2:

Balance, January 1, 20X1 $250,000

Net income for 20X1 60,000

Dividends paid in 20X1 (10,000)

Balance, Dec. 31, 20X1 $300,000

Net income for 20X2 45,000

Dividends paid in 20X2 (10,000)

Balance, December 32, 20X2 $335,000

(2) Investment Entries: Investment Entries 20X1 Subsidiary reports Investment in No entry income of $60,000. Sardine Company Subsidiary Income.. Subsidiary Income % x reported) % (reported- $depreciation)] Subsidiary pays Cash $10,000 dividend Cash... Dividend (or Sardine Company. Sardine Company Investment) ( %>