Question
On January 1, 2016, Moline Co. paid $80,000 for a 20% interest in Oak Industries. Oak Industries stockholders equity amounted to $310,000 on that date.
On January 1, 2016, Moline Co. paid $80,000 for a 20% interest in Oak Industries. Oak Industries stockholders equity amounted to $310,000 on that date. The excess of purchase price over book values was due to an unrecorded patent valued at $90,000 with a 10-year life. During 2016, Oak Industries reported income of $50,000 and paid dividends of $8,000. During 2017, it reported income of $60,000 and dividends of $12,000. Assume that Moline Co. has significant influence over the operations of Oak Industries.
Required:
a. What is the amount of goodwill?
b. What is Equity Income for 2016?
c. What is the balance in the Equity Investment account on December 31, 2016?
d. What is Equity Income for 2017?
e. What is the balance in the Equity Investment account on December 31, 2017?
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