On January 2, 2016, Palomine Corporation purchased 80% of the outstanding common stock and 30% of the outstanding cumulative, nonparticipating, preferred stock of Sour Company for $800,000 and $140,000, respectively. At this date, Sour Company reported account balances of $800,000 in common stock, $400,000 in preferred stock and $200,000 in retained earnings. No other contributed capital accounts exist. The difference between implied and book value of the common stock is attributable to under- or overvalued land. Dividends on the 12% cumulative preferred stock (par $10) were not paid during 2015. Required:
A. Prepare the journal entries made by Palomine Corporation in 2016 to account for the investments assuming the partial equity method is used.
B. Compute the noncontrolling interest in Sour Company's net income.
C. Prepare the 2016 workpaper entries related to the foregoing investments assuming the partial equity method is used to account for the investment.

Question

On January 2, 2016, Palomine Corporation purchased 80% of the outstanding common stock and 30% of the outstanding cumulative, nonparticipating, preferred stock of Sour Company for $800,000 and $140,000, respectively. At this date, Sour Company reported account balances of $800,000 in common stock, $400,000 in preferred stock and $200,000 in retained earnings. No other contributed capital accounts exist. The difference between implied and book value of the common stock is attributable to under- or overvalued land. Dividends on the 12% cumulative preferred stock (par $10) were not paid during 2015.  Required:
A. Prepare the journal entries made by Palomine Corporation in 2016 to account for the investments assuming the partial equity method is used.
B. Compute the noncontrolling interest in Sour Company's net income.
C. Prepare the 2016 workpaper entries related to the foregoing investments assuming the partial equity method is used to account for the investment.

Quizplus · Accepted Answer

The Answer of On January 2, 2016, Palomine Corporation purchased 80% of the outstanding common stock and 30% of the outstanding cumulative, nonparticipating, preferred stock of Sour Company for $800,000 and $140,000, respectively. At this date, Sour Company reported account balances of $800,000 in common stock, $400,000 in preferred stock and $200,000 in retained earnings. No other contributed capital accounts exist. The difference between implied and book value of the common stock is attributable to under- or overvalued land. Dividends on the 12% cumulative preferred stock (par $10) were not paid during 2015.  Required:
A. Prepare the journal entries made by Palomine Corporation in 2016 to account for the investments assuming the partial equity method is used.
B. Compute the noncontrolling interest in Sour Company's net income.
C. Prepare the 2016 workpaper entries related to the foregoing investments assuming the partial equity method is used to account for the investment.

On January 2, 2016, Palomine Corporation Purchased 80% of the Outstanding