Question

P2-3 Computations for investee when excess allocated to inventories, building, and goodvitl Pop Company acquired a 30 percent interest in the voting slock of Son Company for $331,000 on Jnuary 1,2016, when Son's stockholders equity consisted of capital stock of $600,000 and retained eunings of

Answer 1

1)

Pop’s Income Statement
Pop’s reported income Shares (100,000*30%)	30000
Less: excess allocated to inventory	-9,000
Add: Amortization of building (18,000/10)	1,800
Income from Son	22,800

2)

Investment account balance December 31
Cost of investment in son	331,000
Plus: income from Son	22,800
Minus: Dividends (50,000*30%)	-15,000
Investment in Son December 31	338,800

3)

(Beginning balance in stockholders equity + Income - Dividends) * 30%

=(1,000,000 + 100,000 - 50,000) X 30%

=315,000