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Posada Company acquired 7 , 0 0 0 of the 1 0 , 0 0 0 outstanding shares of Sabathia Company on January 1 ,
Posada Company acquired of the outstanding shares of Sabathia Company on January for $ The subsidiary's total fair value was assessed at $ although its book value on that date was $ The $ fair value in excess of Sabathia's book value was assigned to a patent with a fiveyear remaining life. On January Posada reported a $ equity method balance in the Investment in Sabathia Company account. On October Posada sells shares of the investment for $ During Sabathia reported net income of $ and declared dividends of $ These amounts are assumed to have occurred evenly throughout the year. Required: a How should Posada report the income that accrued to the shares prior to their sale? b What is the effect on Posada's financial statements from this sale of shares? a Posada's income for shares sold b to Posada's additional paidin capital
Posada Company acquired of the outstanding shares of Sabathia Company on January for $ The
subsidiary's total fair value was assessed at $ although its book value on that date was $ The $ fair value in
excess of Sabathia's book value was assigned to a patent with a fiveyear remaining life.
On January Posada reported a $ equity method balance in the Investment in Sabathia Company account. On
October Posada sells shares of the investment for $ During Sabathia reported net income of $
and declared dividends of $ These amounts are assumed to have occurred evenly throughout the year.
Required:
a How should Posada report the income that accrued to the shares prior to their sale?
b What is the effect on Posada's financial statements from this sale of shares?
a Posada's income for shares sold
b to Posada's additional paidin capital
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