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. Treat each of the following scenarios as an independent situation: On January 1, 2023, Paul issues 10,000 shares as stock dividend when the stock’s fair market value is $15 per share. What is the adjustment (if any) required to the investment account? Please, show the journal entry for the adjustment if one is needed.
Peter Company acquired 80 percent of the common stock of Paul Company on January 1, 2022, when Paul had the following balances in its
Common stock (40,000 shares outstanding) $ 100,000
Additional paid-in capital 75,000
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
Peter uses the equity method to account for its investment in Paul. On January 1, 2023, Paul has retained earnings of $620,000.
Treat each of the following scenarios as an independent situation:
On January 1, 2023, Paul issues 10,000 shares as stock dividend when the stock’s fair market value is $15 per share. What is the adjustment (if any) required to the investment account? Please, show the
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