Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,328,600 in cash. The price paid was proportionate

image text in transcribed

On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,328,600 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 $1,660,000. 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 $228,000. On January 1, 2018, Palka acquired an additional 25 percent common stock equity interest in Sellinger Company for $510,000 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 2018 580,000 220,000 2017 Net income Dividends declared $ 470,000 190,000 a. Show Palka's journal entry to record its January 1, 2018, acquisition of an additional 25 percent ownership of Sellinger Company shares b. Prepare a schedule showing Palka's December 31, 2018, equity method balance for its Investment in Sellinger account. Complete this question by entering your answers in the tabs below Required A Required B Prepare a schedule showing Palka's December 31, 2018, equity method balance for its Investment in Sellinger account. (Amounts to be deducted should be indicated with a minus sign.) Initial value for acquisition Adjusted subsidiary net income 2017 Subsidiary dividends 2017 Adjusted fair value of newly acquired shares Adjusted subsidiary 2018 net income Subsidiary dividends 2018 Investment in Sellinger 12/31/18 Required A RequiredB

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Trucking Industry IRS Audit Techniques Guide

Authors: Internal Revenue Service

1st Edition

1304135640, 978-1304135643

More Books

Students also viewed these Accounting questions

Question

Why are some fixed assets susceptible to theft?

Answered: 1 week ago

Question

1. Describe the power of nonverbal communication

Answered: 1 week ago