Question
On January 1, 20X6, Pause Company acquired 90 percent of Stop Company by purchasing 90,000 shares of Stop's common stock. There was no differential related
On January 1, 20X6, Pause Company acquired 90 percent of Stop Company by purchasing 90,000 shares of Stop's common stock. There was no differential related to this transaction. The noncontrolling interest had a fair value equal to 10 percent of book value. The book value of Stop's net asset on December 31, 20X6 was $600,000. On January 1, 20X7, Stop repurchased 20,000 of its shares for $2 per share in cash from Pause. During 20X7, Stop reported net income of $50,000 and paid dividends of $20,000. Paused used the equity method in accounting for its ownership of Stop. What was the balance in the Income from Investment account reported in Pause's book on December 31, 20X7? a. $27,000 b. $43,750 c. $45,000 d. $26,250
On January 1, 20X7, Pink Company acquired 80 percent of Skirt Company by purchasing 80,000
shares of Skirt's common stock. There was no differential related to this transaction. The
noncontrolling interest had a fair value equal to 20 percent of book value. The book value of
Skirt's net asset on December 31, 20X7 was $500,000. On January 1, 20X8, Pink sold 10,000 shares
of Skirt for $60,000 in cash to nonaffiliated party. Pink used the equity method in accounting for
its ownership of Skirt. What was the balance in the Noncontrolling in Net Asset account reported
in consolidated financial statement on January 1, 20X8, AFTER Pink sold of shares?
a. $214,286
b. $100,000
c. $150,000
d. $50,000
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