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The solution must be under the GAAP standards

The solution must be under the GAAP standards

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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The solution must be under the GAAP standards
On July 1, 2017, ABC Inc. acquired 80% of XYZS Co. by paying $500,000 in cash. The amount paid represents a good estimate of the acquisition date fair value. XYZS Co. reported a Common Stock account balance of $140,000 (unchanged for the whole year) with no additional paid in capital. Retained Earnings at January 1st 2017 was $235,000. Any excess fair value paid is attributed to patent with a remaining useful life of 10 years. ABC Inc. uses the equity method to record the investment in XYZS Co. On October 1, 2018, ABC Inc. acquired another 10% of XYZS Co. for $70,000. Net Income for XYZS Co for 2017 is $120,000 and dividends are $30,000. In 2018, XYZS Co. earned $126,000 with dividend payments of $42,000. Assume net income and dividends occur evenly during the year. ABC had income of $308,000 in 2017 and $364,000 in 2018. ABC also paid dividends of $50,000 each in 2017 and 2018. Required: 1. Prepare the necessary entry(ies) to record the purchase on July 1st 2017. 2. Prepare the necessary entry(ies) to record the purchase on October 1st, 2018. 3. What is the amount of subsidiary net income allocated to the non-controlling interest for 2018?
Transcribed Image Text:On July 1, 2017, ABC Inc. acquired 80% of XYZS Co. by paying $500,000 in cash. The amount paid represents a good estimate of the acquisition date fair value. XYZS Co. reported a Common Stock account balance of $140,000 (unchanged for the whole year) with no additional paid in capital. Retained Earnings at January 1st 2017 was $235,000. Any excess fair value paid is attributed to patent with a remaining useful life of 10 years. ABC Inc. uses the equity method to record the investment in XYZS Co. On October 1, 2018, ABC Inc. acquired another 10% of XYZS Co. for $70,000. Net Income for XYZS Co for 2017 is $120,000 and dividends are $30,000. In 2018, XYZS Co. earned $126,000 with dividend payments of $42,000. Assume net income and dividends occur evenly during the year. ABC had income of $308,000 in 2017 and $364,000 in 2018. ABC also paid dividends of $50,000 each in 2017 and 2018. Required: 1. Prepare the necessary entry(ies) to record the purchase on July 1st 2017. 2. Prepare the necessary entry(ies) to record the purchase on October 1st, 2018. 3. What is the amount of subsidiary net income allocated to the non-controlling interest for 2018?
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