26. On January 1, 2020, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,141,000 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 $1,380,000. 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 $240,000. On January 1, 2021, Palka acquired an additional 25 percent common stock equity interest in Sellinger Company for $415,000 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: Net income Dividends declared 2020 $340,000 150,000 2021 $440,000 180,000 a. Show Palka's journal entry to record its January 1, 2021, acquisition of an additional 25 percent ownership of Sellinger Company shares. b. Prepare a schedule showing Palka's December 31, 2021, equity method balance for its Invest- ment in Sellinger account.
26. On January 1, 2020, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,141,000 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 $1,380,000. 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 $240,000. On January 1, 2021, Palka acquired an additional 25 percent common stock equity interest in Sellinger Company for $415,000 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: Net income Dividends declared 2020 $340,000 150,000 2021 $440,000 180,000 a. Show Palka's journal entry to record its January 1, 2021, acquisition of an additional 25 percent ownership of Sellinger Company shares. b. Prepare a schedule showing Palka's December 31, 2021, equity method balance for its Invest- ment in Sellinger account.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Subject:- Account
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26. On January 1, 2020, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company
for $1,141,000 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 $1,380,000. 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 $240,000. On January 1, 2021, Palka
acquired an additional 25 percent common stock equity interest in Sellinger Company for $415,000
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:
Net income
Dividends declared
2020
$340,000
150,000
2021
$440,000
180,000
a. Show Palka's journal entry to record its January 1, 2021, acquisition of an additional 25 percent
ownership of Sellinger Company shares.
b. Prepare a schedule showing Palka's December 31, 2021, equity method balance for its Invest-
ment in Sellinger account.
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