16 10 points On January 1, 2020. Palka, Inc., acquired 70 percent of the outstanding shares...

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16 10 points On January 1, 2020. Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1.297.1

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Answer 1

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A. Journal entry for additional acquisition of 25% ownership of Sellinger Company on January 01, 2021

Acquisition date fair value	$1,297,100	70%	$1,853,000
Sellinger net income for 2020			$380,000
excess fair value amortization 2020(w,n)			(55,500)
Sellinger dividend 2020			(160,000)
Acquisition date adjusted subsidiary value on 31/12/2020			$2,017,500
Percent acquired on 1/1/2021			25%
Acquisition date based value for newly acquired shares			$504,375
Acquisition price paid for 25% shares			$484,375
Palka's APIC			$20,000

Investment in Sellinger	$504,375
Cash		$484,375
APIC		$20,000

B. Schedule showing Palka's December 31, 2021, equity method balance for its Investment in -
-Sellinger account
Initial Value of acquisition -70%	$1,297,100
Adjusted subsidiary net income 2020 - 70%(w.n)	$227,150
Subsidiary dividend 2020-70% (160,000*70%)	($112,000)
Adjusted fair value of newly acquired shares	$504,375
Adjusted subsidiary 2021net income -95% (w.n)	$490,675
Subsidiary dividend 2021- 95%	($180,500)
Investment in Sellinger 12/31/2021	$2,226,800

Working Note:
Fair value amortization for Patent
= $333,000/6 years
= $ 55,500per year

Adjusted subsidiary net income 2020
Net income	380,000
Less: Amortization for Patent	(55,500)
Adjusted net income	324,500
Share of Palka-70%	227,150

Adjusted subsidiary net income 2021
Net income	572,000
Less: Amortization for Patent	(55,500)
Adjusted net income	516,500
Share of Palka-95% (516,500*95%)	490,675

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