Paula Inc.purchased an 80% interest in the Sharon Co.for $480,000 on January 1, 2016, when Sharon Co.had the following stockholders' equity:
?
?
$\begin{array}{lr}
\text { Common stock, } \$ 10 \text { par } & \$ 200,000 \
\text { Retained earnings } & \underline{300,000} \
\text { Total equity } & \$ \underline{500,000}
\end{array}$
Any excess is attributable to goodwill.
?
On January 1, 2018, Sharon Co.purchased a 10% interest in the Paula Inc.at a price equal to book value.Both firms maintain investments under the cost method.
?
Required:
?
a.Complete the Figure 8-11 partial worksheet for December 31, 2018, assuming the use of the treasury stock method.?
?
b.Calculate the distribution of income for 2018, assuming that internally generated net income is $50,000 for Paula and $20,000 for Sharon.?
?

Question

Paula Inc.purchased an 80% interest in the Sharon Co.for $480,000 on January 1, 2016, when Sharon Co.had the following stockholders' equity:
?
?
 $\begin{array}{lr}
\text { Common stock, } \$ 10 \text { par } & \$ 200,000 \
\text { Retained earnings } & \underline{300,000} \
\text { Total equity } & \$ \underline{500,000}
\end{array}$
 Any excess is attributable to goodwill.
?
On January 1, 2018, Sharon Co.purchased a 10% interest in the Paula Inc.at a price equal to book value.Both firms maintain investments under the cost method.
?
Required:
? 
a.Complete the Figure 8-11 partial worksheet for December 31, 2018, assuming the use of the treasury stock method.?
?
b.Calculate the distribution of income for 2018, assuming that internally generated net income is $50,000 for Paula and $20,000 for Sharon.?
?

Quizplus · Accepted Answer

The Answer of Paula Inc.purchased an 80% interest in the Sharon Co.for $480,000 on January 1, 2016, when Sharon Co.had the following stockholders' equity:
?
?
 $\begin{array}{lr}
\text { Common stock, } \$ 10 \text { par } & \$ 200,000 \
\text { Retained earnings } & \underline{300,000} \
\text { Total equity } & \$ \underline{500,000}
\end{array}$
 Any excess is attributable to goodwill.
?
On January 1, 2018, Sharon Co.purchased a 10% interest in the Paula Inc.at a price equal to book value.Both firms maintain investments under the cost method.
?
Required:
? 
a.Complete the Figure 8-11 partial worksheet for December 31, 2018, assuming the use of the treasury stock method.?
?
b.Calculate the distribution of income for 2018, assuming that internally generated net income is $50,000 for Paula and $20,000 for Sharon.?
?

Paula IncPurchased an 80% Interest in the Sharon Co Any Excess Is Attributable to Goodwill