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Pop Corporation owns 100 percent (300,000 shares) Of the outstanding shares of Son Corporation's common stock on January 1, 2016. Its investment in Son account on this date is $4,400,000, equal to Son's $4,000,000 stockholders' equity plus $400,000 goodwill. During 2016, Son reported a net income of $ 600,000 and paid no dividends. On April 1, 2016, Pop sold a 15 percent interest (45,000 shares) in Son for $ 750,000, thereby reducing its holdings to 85 percent.

Pop Corporation owns 100 percent (300,000 shares) Of the outstanding shares of Son Corporation's common stock on January 1, 2016. Its investment in Son account on this date is $4,400,000, equal to Son's $4,000,000 stockholders' equity plus $400,000 goodwill. During 2016, Son reported a net income of $ 600,000 and paid no dividends. On April 1, 2016, Pop sold a 15 percent interest (45,000 shares) in Son for $ 750,000, thereby reducing its holdings to 85 percent.

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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Journal entries (Sale of an interest-beginning -of-year assumption) 

Pop Corporation owns 100 percent (300,000 shares) Of the outstanding shares of Son Corporation's common stock on January 1, 2016. Its investment in Son account on this date is $4,400,000, equal to Son's $4,000,000 stockholders' equity plus $400,000 goodwill. During 2016, Son reported a net income of $ 600,000 and paid no dividends. On April 1, 2016, Pop sold a 15 percent interest (45,000 shares) in Son for $ 750,000, thereby reducing its holdings to 85 percent. Required: Prepare the journal entries needed for Pop to account for its investment in Son for 2016, using a beginning-of-year assumption. Note: I would appreciate if you provide a step-by-step explanation and prepare the journal entries as it should look in an actual "journal ". Thank you in advanced for your times and support.
Transcribed Image Text:Pop Corporation owns 100 percent (300,000 shares) Of the outstanding shares of Son Corporation's common stock on January 1, 2016. Its investment in Son account on this date is $4,400,000, equal to Son's $4,000,000 stockholders' equity plus $400,000 goodwill. During 2016, Son reported a net income of $ 600,000 and paid no dividends. On April 1, 2016, Pop sold a 15 percent interest (45,000 shares) in Son for $ 750,000, thereby reducing its holdings to 85 percent. Required: Prepare the journal entries needed for Pop to account for its investment in Son for 2016, using a beginning-of-year assumption. Note: I would appreciate if you provide a step-by-step explanation and prepare the journal entries as it should look in an actual "journal ". Thank you in advanced for your times and support.
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