Public Corporation acquired 90 percent of Station Company's voting common stock on January 1, 20X1, for $516,600. At the time of the combination, Station reported common stock outstanding of $129,000 and retained earnings of $385,000, and the fair value of the noncontrolling interest was $57,400. The book value of Station's net assets approximated market value except for patents that had a market value of $60,000 more than their book value. The patents had a remaining economic life of ten years at the date of the business combination. Station reported net income of $80,000 and paid dividends of $21,000 during 20X1. Required: a. What balance did Public report as its investment in Station at December 31, 20X1, assuming Public uses the equity method in accounting for its investment? Balance in investment account $ 564,300 b. Prepare the consolidation entry or entries needed to prepare consolidated financial statements at December 31, 2 Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. No A Event 1 Common stock Retained earnings B 2 C 3 Accounts Income from Station Company NCI in Net Income of Station Company Dividends declared Investment in Station Company NCI in Net assets of Station Company Amortization Expense Income from Station Company NCI in Net Income of Station Company Patents Investment in Station Company NCI in Net assets of Station Company | | | Debit Credit 129,000 385,000 72,000 8,000 21,000 515,700 57,300 54,000 6,000 5,400 600 48,600 5,400 Explanation a. Station Company's common stock, January 1, 20X1 Station Company's retained earnings, January 1, 20X1 Book value of Station's net assets Proportion of stock acquired Book value of Station's shares purchased by Public Corporation Excess of acquisition price over book value Fair value of consideration given Add: Share of Station's net income ($80,000 0.90) Less: Amortization of patents ($60,000 / 10) 0.90 Less: Dividends paid by Station ($21,000 0.90) Balance in investment account, December 31, 20x1 b. Equity Method Entries on Public Corporation's Books: General Journal Investment in Station Company Cash Record the initial investment in Station Company General Journal Investment in Station Company Income from Station Company Debit Credit 516,600 516,600 Debit Credit 72,000 72,000 $ 129,000 385,000 $ 514,000 0.90 $ 462,600 54,000 $ 516,600 72,000 (5,400) (18,900) $ 564,300 Record Public Corporation's 90% share of Station Company's 20X1 income. General Journal Cash Debit Credit 18,900 Cash Investment in Station Company 18,900 18,900 Record Public Corporation's 90% share of Station Company's 20X1 dividend. General Journal Income from Station Company Investment in Station Company Record amortization of excess acquisition price. Book Value Calculations: Debit Credit 5,400 5,400 Beginning book value + Net Income - Dividends Ending book value Excess Value (Differential) Calculations: NCI 10% + $ 51,400 8,000 (2,100) Public Corporation 90% = $ 462,600 Common Stock + $ 129,000 72,000 (18,900) $ 57,300 $ 515,700 $ 129,000 $ 6,000 (600) $ 5,400 Public Corporation 90% = $ 54,000 (5,400) $ 48,600 Patents $ 60,000 (6,000) $ 54,000 NCI 10% + Beginning balance Changes Ending balance Retained Earnings $ 385,000 80,000 (21,000) $ 444,000 Beginning book value + Net Income - Dividends Ending book value NCI 10% + $ 51,400 8,000 (2,100) Public Corporation 90% = $ 462,600 Common Stock + $ 129,000 72,000 (18,900) $ 57,300 $ 515,700 $ 129,000 Retained Earnings $ 385,000 80,000 (21,000) $ 444,000 Excess Value (Differential) Calculations: Public Corporation 90% = NCI 10% + Patents Beginning balance Changes Ending balance $ 6,000 (600) $ 5,400 $ 54,000 (5,400) $ 60,000 (6,000) $ 48,600 $ 54,000 Investment in Station Company Debit Acquisition Price 90% Net Income Credit 516,600 72,000 18,900 90% Dividends 5,400 Excess Value Amortization Ending Balance 564,300 515,700 48,600 Basic Excess Reclassification 0 Debit Income from Station Company Credit 5,400 Excess Value Amortization Ending Balance 564,300 515,700 48,600 Basic Excess Reclassification Income from Station Company Debit Credit 72,000 90% Net Income Excess Value Amortization 5,400 66,600 Ending Balance Basic 72,000 5,400 Amortized Reclassification