On 1/1/X1 Poncho acquired an 80% interest in Stroller for $560,000 when Stroller's equity consisted of $530,000 paid-in capital and $100,000 Retained Earnings. Any excess of purchase price over was attributed to goodwill.
On January 1, 20X6, Stroller had the following stockholders' equity:
On January 2, 20X6, Company S sold 1,000 additional shares to noncontrolling shareholders in a public offering for $50 per share. Stroller's net income for 20X6 was 80,000. Poncho uses the simple equity method to record its investment in Stroller.
Required:
a.Prepare Poncho's journal entry to adjust its Investment in Stroller account on January 2, 20X6. Assume that Poncho has $500,000 additional paid-in capital.
b.Determine the carrying value of Poncho's Investment in Stroller account on December 31, 20X6.

Question

On 1/1/X1 Poncho acquired an 80% interest in Stroller for $560,000 when Stroller's equity consisted of $530,000 paid-in capital and $100,000 Retained Earnings. Any excess of purchase price over was attributed to goodwill.
On January 1, 20X6, Stroller had the following stockholders' equity:  
On January 2, 20X6, Company S sold 1,000 additional shares to noncontrolling shareholders in a public offering for $50 per share. Stroller's net income for 20X6 was 80,000. Poncho uses the simple equity method to record its investment in Stroller.
Required: 
a.Prepare Poncho's journal entry to adjust its Investment in Stroller account on January 2, 20X6. Assume that Poncho has $500,000 additional paid-in capital.
b.Determine the carrying value of Poncho's Investment in Stroller account on December 31, 20X6.

Quizplus · Accepted Answer

The Answer of On 1/1/X1 Poncho acquired an 80% interest in Stroller for $560,000 when Stroller's equity consisted of $530,000 paid-in capital and $100,000 Retained Earnings. Any excess of purchase price over was attributed to goodwill.
On January 1, 20X6, Stroller had the following stockholders' equity:  
On January 2, 20X6, Company S sold 1,000 additional shares to noncontrolling shareholders in a public offering for $50 per share. Stroller's net income for 20X6 was 80,000. Poncho uses the simple equity method to record its investment in Stroller.
Required: 
a.Prepare Poncho's journal entry to adjust its Investment in Stroller account on January 2, 20X6. Assume that Poncho has $500,000 additional paid-in capital.
b.Determine the carrying value of Poncho's Investment in Stroller account on December 31, 20X6.

On 1/1/X1 Poncho Acquired an 80% Interest in Stroller for $560,000