Point Co.purchased 90% of Sharpe Corp.'s voting stock on January 1,20X2 for $5,580,000.Prior to the acquisition,Point held a 10% equity position in Sharpe Company.On January 1,20X2 Pointe's 10% investment in Sharpe has a book value of $340,000 and a fair value of $620,000.On January 1,20X2 Point records the following:

Question

Quizplus · Accepted Answer

When Point Co. acquired an additional 90% of Sharpe Corp., it revalued its existing 10% investment to fair value, recognizing a gain of $280,000 ($620,000 fair value - $340,000 book value). This gain is credited to reflect the increase in value.

Point CoPurchased 90% of Sharpe Corp