Purse Corporation acquired 70 percent of Scarf Corporation’s ownership on January 1, 20X8, for $140,000. At that date, Scarf reported capital stock outstanding of $120,000 and retained earnings of $80,000, and the fair value of the noncontrolling interest was equal to 30 percent of the book value of Scarf. During 20X8, Scarf reported net income of $30,000 and comprehensive income of $36,000 and paid dividends of $25,000. Required: Present all equity-method entries that Purse would have recorded in accounting for its investment in Scarf during 20X8.
Purse Corporation acquired 70 percent of Scarf Corporation’s ownership on January 1, 20X8, for $140,000. At that date, Scarf reported capital stock outstanding of $120,000 and
Required:
- Present all equity-method entries that Purse would have recorded in accounting for its investment in Scarf during 20X8.
Working :-
1) Calculation of net income from scarf corporation :-
Net income * percentage acquired
= $30,000 * 70%
= $21,000
2) Calculation of other comprehensive income from investment :-
(Comprehensive income - net income) * percentage acquired
= ($36,000 - $30,000) * 70%
= $6,000 * 70%
= $4,200
3) Calculation of Dividend from scarf corporation :-
Dividends paid * percentage acquired
= $25,000 * 70%
= $17,500
Step by step
Solved in 2 steps
