Petunia Corporation acquired 90 percent of the stock of Spring Company on January 1,20X2,for $360,000.At that date,the fair value of the noncontrolling interest was $40,000.Spring's balance sheet contained the following amounts at the time of the combination:
During each of the next three years,Spring reported net income of $70,000 and paid dividends of $20,000.On January 1,20X4,Petunia sold 3,000 shares of Spring's $5 par value shares for $90,000 in cash.Petunia used the fully adjusted equity method in accounting for its ownership of Spring Company.
-Based on the preceding information,in the consolidation entries to complete a consolidation worksheet at January 1,20X4 (after the sale of the 3,000 shares of Spring stock),Investment in Spring Stock will be credited for

Question

Petunia Corporation acquired 90 percent of the stock of Spring Company on January 1,20X2,for $360,000.At that date,the fair value of the noncontrolling interest was $40,000.Spring's balance sheet contained the following amounts at the time of the combination:
  During each of the next three years,Spring reported net income of $70,000 and paid dividends of $20,000.On January 1,20X4,Petunia sold 3,000 shares of Spring's $5 par value shares for $90,000 in cash.Petunia used the fully adjusted equity method in accounting for its ownership of Spring Company.
-Based on the preceding information,in the consolidation entries to complete a consolidation worksheet at January 1,20X4 (after the sale of the 3,000 shares of Spring stock),Investment in Spring Stock will be credited for

Quizplus · Accepted Answer

The Investment in Spring Stock account will be adjusted to reflect the sale of 3,000 shares of Spring's $5 par value shares for $90,000 in cash. The remaining shares held by Petunia are 9,000 shares (90% of 10,000 shares). The book value of Petunia's investment in Spring as of January 1, 20X4 can be calculated as follows:

Book value of investment in Spring as of January 1, 20X4:
= Initial investment + Share of Spring's net income - Share of Spring's dividends
= $360,000 + ($70,000 x 3 x 0.9) - ($20,000 x 3 x 0.9)
= $375,000

Therefore, Investment in Spring Stock will be credited for $375,000 in the consolidation entries to complete a consolidation worksheet at January 1, 20X4.

Petunia Corporation Acquired 90 Percent of the Stock of Spring