On January 1, 2023, Palka, Incorporated, acquired 70 percent of the outstanding shares of Sellinger Company for $1,232,700 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 $1,490,000. 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 $261,000. On January 1, 2024, Palka acquired an additional 25 percent common stock equity interest in Sellinger Company for $511,875 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: Items Net income Dividends declared 2023 $ 570,000 160,000 Required A Required B $ Required: a. Show Palka's journal entry to record its January 1, 2024, acquisition of an additional 25 percent ownership of Sellinger Company shares. b. Prepare a schedule showing Palka's December 31, 2024, equity method balance for its Investment in Sellinger account. 2024 675,000 190,000 Complete this question by entering your answers in the tabs below. Initial value for acquisition Adjusted subsidiary net income 2023 Subsidiary dividends 2023 Adjusted fair value of newly acquired shares Adjusted subsidiary 2024 net income Subsidiary dividends 2024 Investment in Sellinger 12/31/24 Prepare a schedule showing Palka's December 31, 2024, equity method balance for its Investment in Sellinger account. Note: Amounts to be deducted should be indicated with a minus sign. $ < Required A 0 Required B
On January 1, 2023, Palka, Incorporated, acquired 70 percent of the outstanding shares of Sellinger Company for $1,232,700 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 $1,490,000. 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 $261,000. On January 1, 2024, Palka acquired an additional 25 percent common stock equity interest in Sellinger Company for $511,875 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: Items Net income Dividends declared 2023 $ 570,000 160,000 Required A Required B $ Required: a. Show Palka's journal entry to record its January 1, 2024, acquisition of an additional 25 percent ownership of Sellinger Company shares. b. Prepare a schedule showing Palka's December 31, 2024, equity method balance for its Investment in Sellinger account. 2024 675,000 190,000 Complete this question by entering your answers in the tabs below. Initial value for acquisition Adjusted subsidiary net income 2023 Subsidiary dividends 2023 Adjusted fair value of newly acquired shares Adjusted subsidiary 2024 net income Subsidiary dividends 2024 Investment in Sellinger 12/31/24 Prepare a schedule showing Palka's December 31, 2024, equity method balance for its Investment in Sellinger account. Note: Amounts to be deducted should be indicated with a minus sign. $ < Required A 0 Required B
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2023, Palka, Incorporated, acquired 70 percent of the outstanding shares of Sellinger Company for $1,232,700 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
$1,490,000. 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 $261,000. On January 1, 2024, Palka acquired an additional 25 percent
common stock equity interest in Sellinger Company for $511,875 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:
Items
Net income
Dividends declared
2023
$ 570,000
160,000
Required A Required B
$
Required:
a. Show Palka's journal entry to record its January 1, 2024, acquisition of an additional 25 percent ownership of Sellinger Company
shares.
b. Prepare a schedule showing Palka's December 31, 2024, equity method balance for its Investment in Sellinger account.
2024
675,000
190,000
Complete this question by entering your answers in the tabs below.
Initial value for acquisition
Adjusted subsidiary net income 2023
Subsidiary dividends 2023
Adjusted fair value of newly acquired shares
Adjusted subsidiary 2024 net income
Subsidiary dividends 2024
Investment in Sellinger 12/31/24
Prepare a schedule showing Palka's December 31, 2024, equity method balance for its Investment in Sellinger account.
Note: Amounts to be deducted should be indicated with a minus sign.
$
< Required A
0
Required B
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