Selectron Inc. acquired 60% of Insor Inc. on January 1, 2019 for $180,000, when Insor's Common Shares and Retained Earnings were worth $60,000 and $180,000 respectively. Insor's fair values approximated their book values on that date. Selectron currently uses the Equity Method to account for its investment in Insor.
During 2019, investment income in the amount of $12,000 and dividends in the amount of $1,200 were recorded in Selectron's Investment in Insor account. During 2020, investment income in the amount of $24,000 and dividends in the amount of $2,400 were recorded in Selectron's Investment in Insor account. Insor declares dividends in the amount of 10% of its earnings.
Required:
a) Compute Insor's net income for 2019 and 2020.
b) Compute the amount of dividends declared by Insor in each year.
c) Compute the balance in the non-controlling interest account as at December 31, 2020.

Question

Quizplus · Accepted Answer

The Answer of Selectron Inc. acquired 60% of Insor Inc. on January 1, 2019 for $180,000, when Insor's Common Shares and Retained Earnings were worth $60,000 and $180,000 respectively. Insor's fair values approximated their book values on that date. Selectron currently uses the Equity Method to account for its investment in Insor.
During 2019, investment income in the amount of $12,000 and dividends in the amount of $1,200 were recorded in Selectron's Investment in Insor account. During 2020, investment income in the amount of $24,000 and dividends in the amount of $2,400 were recorded in Selectron's Investment in Insor account. Insor declares dividends in the amount of 10% of its earnings.
Required:
a) Compute Insor's net income for 2019 and 2020.
b) Compute the amount of dividends declared by Insor in each year.
c) Compute the balance in the non-controlling interest account as at December 31, 2020.