Purchase of Additional Shares from Nonaffiliate
Weal Corporation purchased 60 percent of Modern Products Company’s shares on December 31, 20X7, for $210,000. At that date, the fair value of the noncontrolling interest was $140,000. On January 1, 20X9, Weal purchased an additional 20 percent of Modern’s common stock for
$96,000. Summarized balance sheets for Modern on the dates indicated are as follows:
| December 31 | ||
20X7 | 20X8 | 20X9 | |
Cash Accounts Receivable Inventory Buildings and Equipment (net) | $ 40,000 50,000 70,000 340,000 | $ 70,000 90,000 100,000 320,000 | $ 90,000 120,000 160,000 300,000 |
Total Assets | $500,000 | $580,000 | $670,000 |
Accounts Payable Bonds Payable Common Stock Retained Earnings | $ 50,000 100,000 150,000 200,000 | $100,000 100,000 150,000 230,000 | $140,000 100,000 150,000 280,000 |
Total Liabilities and Equities | $500,000 | $580,000 | $670,000 |
Modern paid dividends of $20,000 in each of the three years. Weal uses the basic equity method in accounting for its investment in Modern and amortizes all differentials over 10 years against the related investment income. All differentials are assigned to patents in the consolidated financial statements.
Required
a. Compute the balance in Weal’s Investment in Modern Products Company Stock account on December 31, 20X8.
b. Compute the balance in Weal’s Investment in Modern Products Company Stock account on December 31, 20X9.
c. Prepare the eliminating entries needed as of December 31, 20X9, to complete a three-part consolidation worksheet.
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