On January 1, 2020, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed, Inc., for $1,035,000 in cash and stock options. At the acquisition date, NetSpeed had common stock of $1,090,000 and Retained Earnings of $54,500. The acquisition-date fair value of the 10 percent noncontrolling interest was $115,000. QuickPort attributed the $5,500 excess of NetSpeed's fair value over book value to a database with a five-year remaining life. During the next two years, NetSpeed reported the following:Net IncomeDividends Declared2020$7,700 $1,100 2021 11,000 1,100 On July 1, 2020, QuickPort sold communication equipment to NetSpeed for $8,500. The equipment originally cost $22,000 and had accumulated depreciation of $15,900 and an estimated remaining life of three years at the date of the intra-entity transfer. Compute the equity method balance in QuickPort's Investment in NetSpeed, Inc., account as of December 31, 2021.Prepare the worksheet adjustments for the December 31, 2021, consolidation of QuickPort and NetSpeed.

Equity Method:- It is a method of accounting and this method applies when a company's ownership…

Answered: On January 1, 2020, QuickPort Company…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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On January 1, 2020, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed, Inc., for $1,035,000 in cash and stock options. At the acquisition date, NetSpeed had common stock of $1,090,000 and Retained Earnings of $54,500. The acquisition-date fair value of the 10 percent noncontrolling interest was $115,000. QuickPort attributed the $5,500 excess of NetSpeed's fair value over book value to a database with a five-year remaining life.

During the next two years, NetSpeed reported the following:

Net Income	Dividends Declared
2020	$	7,700	$	1,100
2021		11,000		1,100

On July 1, 2020, QuickPort sold communication equipment to NetSpeed for $8,500. The equipment originally cost $22,000 and had accumulated depreciation of $15,900 and an estimated remaining life of three years at the date of the intra-entity transfer.

Compute the equity method balance in QuickPort's Investment in NetSpeed, Inc., account as of December 31, 2021.
Prepare the worksheet adjustments for the December 31, 2021, consolidation of QuickPort and NetSpeed.

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