Shebing Corporation had $80,000 of $10 par value common stock outstanding on January 1,2010,and retained earnings of $120,000 on the same date.During 2010 and 2011,Shebing earned net incomes of $30,000 and $45,000,respectively,and paid dividends of $8,000 and $10,000,respectively.
On January 1,2010,Pentz Company purchased 25% of Shebing's outstanding common stock for $60,000.On January 1,2011,Pentz purchased an additional 10% of Shebing's outstanding stock for $30,200.The payments made by Pentz in excess of the book value of net assets acquired were attributed to equipment,with each excess value amount depreciable over 8 years under the straight-line method.
Required:
1.What is the adjustment to Investment Income for depreciation expense relating to Pentz's Investment in Shebing in 2010 and 2011?
2.What will be the December 31,2011 balance in the Investment in Shebing account after all adjustments have been made?

Question

Quizplus · Accepted Answer

The Answer of Shebing Corporation had $80,000 of $10 par value common stock outstanding on January 1,2010,and retained earnings of $120,000 on the same date.During 2010 and 2011,Shebing earned net incomes of $30,000 and $45,000,respectively,and paid dividends of $8,000 and $10,000,respectively.
On January 1,2010,Pentz Company purchased 25% of Shebing's outstanding common stock for $60,000.On January 1,2011,Pentz purchased an additional 10% of Shebing's outstanding stock for $30,200.The payments made by Pentz in excess of the book value of net assets acquired were attributed to equipment,with each excess value amount depreciable over 8 years under the straight-line method.
Required:
1.What is the adjustment to Investment Income for depreciation expense relating to Pentz's Investment in Shebing in 2010 and 2011?
2.What will be the December 31,2011 balance in the Investment in Shebing account after all adjustments have been made?

Shebing Corporation Had $80,000 of $10 Par Value Common Stock