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Problem 4-27 (Static) (LO 4-10) Posada Company acquired 7,000 of the 10,000 outstanding shares of Sabathia Company on January 1, 2022, for $840,000. The subsidiary's total fair value was assessed at $1,200,000 although its book value on that date was $1,130,000. The $70,000 fair value in excess of Sabathia's book value was assigned to a patent with a five-year remaining life. On January 1, 2024, Posada reported a $1,085,000 equity method balance in the Investment in Sabathia Company account. On October 1, 2024, Posada sells 1,000 shares of the investment for $191,000. During 2024, Sabathia reported net income of $120,000 and declared dividends of $40,000. These amounts are assumed to have occurred evenly throughout the year. Required: a. How should Posada report the 2024 income that accrued to the 1,000 shares prior to their sale? b. What is the effect on Posada's financial statements from this sale of 1,000 shares? a. b. Answer is not complete. Posada's income for shares sold Credit to Posada's additional paid-in capital

Problem 4-27 (Static) (LO 4-10) Posada Company acquired 7,000 of the 10,000 outstanding shares of Sabathia Company on January 1, 2022, for $840,000. The subsidiary's total fair value was assessed at $1,200,000 although its book value on that date was $1,130,000. The $70,000 fair value in excess of Sabathia's book value was assigned to a patent with a five-year remaining life. On January 1, 2024, Posada reported a $1,085,000 equity method balance in the Investment in Sabathia Company account. On October 1, 2024, Posada sells 1,000 shares of the investment for $191,000. During 2024, Sabathia reported net income of $120,000 and declared dividends of $40,000. These amounts are assumed to have occurred evenly throughout the year. Required: a. How should Posada report the 2024 income that accrued to the 1,000 shares prior to their sale? b. What is the effect on Posada's financial statements from this sale of 1,000 shares? a. b. Answer is not complete. Posada's income for shares sold Credit to Posada's additional paid-in capital

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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Problem 4-27 (Static) (LO 4-10) Posada Company acquired 7,000 of the 10,000 outstanding shares of Sabathia Company on January 1, 2022, for $840,000. The subsidiary's total fair value was assessed at $1,200,000 although its book value on that date was $1,130,000. The $70,000 fair value in excess of Sabathia's book value was assigned to a patent with a five-year remaining life. On January 1, 2024, Posada reported a $1,085,000 equity method balance in the Investment in Sabathia Company account. On October 1, 2024, Posada sells 1,000 shares of the investment for $191,000. During 2024, Sabathia reported net income of $120,000 and declared dividends of $40,000. These amounts are assumed to have occurred evenly throughout the year. Required: a. How should Posada report the 2024 income that accrued to the 1,000 shares prior to their sale? b. What is the effect on Posada's financial statements from this sale of 1,000 shares? a. b. Answer is not complete. Posada's income for shares sold Credit to Posada's additional paid-in capital
Transcribed Image Text:Problem 4-27 (Static) (LO 4-10) Posada Company acquired 7,000 of the 10,000 outstanding shares of Sabathia Company on January 1, 2022, for $840,000. The subsidiary's total fair value was assessed at $1,200,000 although its book value on that date was $1,130,000. The $70,000 fair value in excess of Sabathia's book value was assigned to a patent with a five-year remaining life. On January 1, 2024, Posada reported a $1,085,000 equity method balance in the Investment in Sabathia Company account. On October 1, 2024, Posada sells 1,000 shares of the investment for $191,000. During 2024, Sabathia reported net income of $120,000 and declared dividends of $40,000. These amounts are assumed to have occurred evenly throughout the year. Required: a. How should Posada report the 2024 income that accrued to the 1,000 shares prior to their sale? b. What is the effect on Posada's financial statements from this sale of 1,000 shares? a. b. Answer is not complete. Posada's income for shares sold Credit to Posada's additional paid-in capital
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