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: 2020 2021 Net income $340,000 $440,000 Dividends declared 150,000 180,000 Show Palka's journal entry to record its January 1, 2021, acquisition of an additional 25 percent ownership of Sellinger Company shares.
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: 2020 2021 Net income $340,000 $440,000 Dividends declared 150,000 180,000 Show Palka's journal entry to record its January 1, 2021, acquisition of an additional 25 percent ownership of Sellinger Company shares.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Ee 109.
![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: 2020 2021 Net income $340,000 $440,000 Dividends declared
150,000 180,000
Show Palka's journal entry to record its January 1, 2021, acquisition of an additional 25 percent ownership of Sellinger
Company shares.
Acquisition-date total fair value
Book value of net assets
Fair value in excess of book value
Excess fair value assigned to
Patent
Land
Buildings
Goodwill
Total
Consolidated figures following January 1 acquisition date:
Combined revenues
Combined expenses
Consolidated net income
NCI in Sawyer's income ([200,000 - 31,000] × 30%)
Controlling interest in consolidated net income
0
Life
5 years
10 years
Amortization
469,000
-50,700
418300](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0a3e78eb-177a-4641-8051-104081d72a2a%2F2a5ba755-2a56-4bb9-93c4-2126f20394c6%2Ftlw1vso_processed.png&w=3840&q=75)
Transcribed Image Text: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: 2020 2021 Net income $340,000 $440,000 Dividends declared
150,000 180,000
Show Palka's journal entry to record its January 1, 2021, acquisition of an additional 25 percent ownership of Sellinger
Company shares.
Acquisition-date total fair value
Book value of net assets
Fair value in excess of book value
Excess fair value assigned to
Patent
Land
Buildings
Goodwill
Total
Consolidated figures following January 1 acquisition date:
Combined revenues
Combined expenses
Consolidated net income
NCI in Sawyer's income ([200,000 - 31,000] × 30%)
Controlling interest in consolidated net income
0
Life
5 years
10 years
Amortization
469,000
-50,700
418300
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