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

Answer #1

(a)

Date	General Journal	Debit	Credit
January 01, 2021	Investment in Sellinger	504,375
	Cash		484,375
	Additional paid in capital		20,000

Acquisition-date fair value (1,297,100/70%)	1,853,000
Sellinger net income 2020	380,000
Excess fair value amortization 2017 (333,000/6)	(55,500)
Sellinger dividends 2020	(160,000)
Acquisition-date adjusted subsidiary value 12/31/20	2,017,500
Percent acquired 1/1/21	25%
Acquisition-date based value of newly acquired shares	504,375
Acquisition price for 25% interest	484,375
Credit to Palka’s APIC	20,000

(b)

Initial value for 70% acquisition	1,297,100
70% of adjusted 2020 subsidiary net income (380,000-55,500)*70%	227,150
70% of subsidiary dividends 2020 (160,000*70%)	(112,000)
Adjusted fair value of newly acquired shares	504,375
95% of adjusted subsidiary 2021 net income ($572,000-55,500)*95%	490,675
95% of subsidiary dividends 2021 (190,000*95%)	(180,500)
Investment in Sellinger 12/31/21	$2,226,800

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