E 4-4 Equity method The stockholder’s equity accounts of Pop Corporation and Son Corporation at December 31, 2015, were as follows (in thousands): Pop Corporation Son Corporation Capital stock $1,200 $500 Retained earnings 500 100 Total $1,700 $600 On January 1, 2016, Pop Corporation acquired an 80 percent interest in Son Corporation for $580,000. The excess fair value was due to Son’s equipment being undervalued by $50,000 and unrecorded patents. The undervalued equipment had a five-year remaining useful life when Pop acquired its interest. Patents are amortized over 10 years. The income and dividends of Pop and Son are as follows (in thousands): Pop Son 2016 2017 2016 2017 Net income $340 $350 $120 $150 Dividends 240 250 80 90 Required Assume that Pop Corporation uses the equity method of accounting for its investment in Son. Determine consolidated net income for Pop Corporation and Subsidiary for 2016. Compute the balance of Pop’s Investment in Son account at December 31, 2016.
E 4-4 Equity method
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The
stockholder’s equity accounts of Pop Corporation and Son Corporation at December 31, 2015, were as follows (in thousands):Pop Corporation
Son Corporation
Capital stock
$1,200
$500
Retained earnings 500
100
Total
$1,700
$600
On January 1, 2016, Pop Corporation acquired an 80 percent interest in Son Corporation for $580,000. The excess fair value was due to Son’s equipment being undervalued by $50,000 and unrecorded patents. The undervalued equipment had a five-year remaining useful life when Pop acquired its interest. Patents are amortized over 10 years.
The income and dividends of Pop and Son are as follows (in thousands):
Pop
Son
2016
2017
2016
2017
Net income
$340
$350
$120
$150
Dividends
240
250
80
90
Required
Assume that Pop Corporation uses the equity method of accounting for its investment in Son.
-
Determine consolidated net income for Pop Corporation and Subsidiary for 2016.
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Compute the balance of Pop’s Investment in Son account at December 31, 2016.
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