On January 2, 2018, Pit Corp. purchased 80% stake in Stop Corp. common stock is $ 448,000 when Stop Corp. reported
On January 2, 2018, Pit Corp. purchased 80% stake in Stop Corp. common stock is $ 448,000 when Stop Corp. reported net assets of $ 480,000. Book value from Stop Corp. assets & liablities at acquisition were equal to fair value, except for land undervalued $ 15,000 and building & equipment-net (useful life 8 years from acquisition date) which were undervalued $ 40,000.
Additional data:
1. Pit Corp. recorded its investment in Stop Corp. using the equity method.
2. Net Income Stop Corp. for 2020 is $ 70,000.
3. In 2020, Stop Corp announced two cash dividends, June 15 and December 15, of $ 20,000 each.
4. There are no goodwill impairments during 2020.
5. Since the acquisition, Pit and Stop have been involved in the following inter-company transactions:
During 2019:
• Stop Corp. sold inventory for $ 64,000 to Pit Corp. Gross profit 50% of the cost. Pit Corp. resell 60% of this inventory in 2019 and the remaining 40% in 2020.
• Pit Corp. sold inventory at a cost of $ 32,000 to Stop Corp. Gross profit 30% of the cost. Stop Corp. sold 3/4 of this inventory in 2019 and the remaining 1/4 in 2020.
During 2020:
• Stop Corp. sold inventory for $ 48,000 to Pit Corp. valued at $ 72,000. At the end of 2020, Pit Corp. has sold 1/3 of the inventory.
• Pit Corp. sold inventory for $ 14,400 to Stop Corp for $ 19,200. Until the end of 2020, Stop Corp. has not resold the inventory purchased from Pit Corp, and Stop Corp. just paid $ 9,000 to Pit Corp.
6. Balance of Accumulated Depreciation-Buildings & Equipment Stop Corp. on January 2, 2018 it was $ 22,500.
7. Stockholders' equity of Stop Corp. as of December 31, 2019 is Common Stock $ 160,000; Additional Paid-in Capital $ 32,000 and Retained Earnings $ 344,000.
Requested:
1. Calculate 2020 Income from Stop and NCI Share.
2.Calculate the Investment in Stop as of 31 December 2019 by way of 2.
3.Calculate the Investment in Stop as of 31 December 2020 with method 1 and method 2.
4. Make the consolidation entries needed to make the consolidated financial statements as of December 31, 2020.
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On January 2, 2018, Pit Corp. purchased 80% stake in Stop Corp. common stock is $ 448,000 when Stop Corp. reported
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