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Peter Company acquired 80 percent of the common stock of Paul Company on January 1, 2022, when Paul had the following balances in its stockholders' equity accounts:

Peter Company acquired 80 percent of the common stock of Paul Company on January 1, 2022, when Paul had the following balances in its stockholders' equity accounts:

FINANCIAL ACCOUNTING
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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Peter Company acquired 80 percent of the common stock of Paul Company on January 1, 2022, when Paul had the following balances in its stockholders' equity accounts: Common stock (40,000 shares outstanding) $ 100,000 Additional paid-in capital 75,000 Retained earnings, 1/1/22 540,000 Total stockholders' equity $715,000 To acquire this interest in Paul, Peter pays a total of $592,000. The acquisition-date fair value of the 20 percent noncontrolling interest was $148,000. Any excess fair value was allocated to goodwill, which has not experienced any impairment. Peter uses the equity method to account for its investment in Paul. On January 1, 2023, Paul has retained earnings of $620,000. On January 1, 2023, Paul reacquires 8,000 of the outstanding shares of its own common stock for $24 per share. None of these shares belonged to Peter. What is the adjustment (if any) required to the investment account? What is the journal entry for the adjustment if one is needed?
Transcribed Image Text:Peter Company acquired 80 percent of the common stock of Paul Company on January 1, 2022, when Paul had the following balances in its stockholders' equity accounts: Common stock (40,000 shares outstanding) $ 100,000 Additional paid-in capital 75,000 Retained earnings, 1/1/22 540,000 Total stockholders' equity $715,000 To acquire this interest in Paul, Peter pays a total of $592,000. The acquisition-date fair value of the 20 percent noncontrolling interest was $148,000. Any excess fair value was allocated to goodwill, which has not experienced any impairment. Peter uses the equity method to account for its investment in Paul. On January 1, 2023, Paul has retained earnings of $620,000. On January 1, 2023, Paul reacquires 8,000 of the outstanding shares of its own common stock for $24 per share. None of these shares belonged to Peter. What is the adjustment (if any) required to the investment account? What is the journal entry for the adjustment if one is needed?
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