On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company's capital stock for $576,000 in cash and other assets. Nephew had a book value of $678,000, and the 20 percent noncontrolling interest fair value was $144,000 on that date. On January 1, 2021, Nephew had acquired 30 percent of Uncle for $288,250. Uncle's appropriately adjusted book value as of that date was $927,500. Separate operating income figures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $20,000 in dividends to shareholders each year and Nephew distributes $5,000 annually. Any excess fair-value allocations are amortized over a 10-year period. Uncle Year Company 2019 $ 107,000 2020 156.000 Nephew Company $ 33,000 57.800

On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company's capital stock for $576,000 in cash and other assets. Nephew had a book value of $678,000, and the 20 percent noncontrolling interest fair value was $144,000 on that date. On January 1, 2021, Nephew had acquired 30 percent of Uncle for $288,250. Uncle's appropriately adjusted book value as of that date was $927,500. Separate operating income figures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $20,000 in dividends to shareholders each year and Nephew distributes $5,000 annually. Any excess fair-value allocations are amortized over a 10-year period. Uncle Year Company 2019 $ 107,000 2020 156.000 Nephew Company $ 33,000 57.800

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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