On 1/1/X1 Poncho Acquired an 80% Interest in Stroller for $560,000

question 7

Essay

On 1/1/X1 Poncho acquired an 80% interest in Stroller for $560,000 when Stroller's equity consisted of $530,000 paid-in capital and $100,000 Retained Earnings. Any excess of purchase price over was attributed to goodwill.
On January 1, 20X6, Stroller had the following stockholders' equity:
$\begin{array}{lr}\text { Common stock }(\$ 20 \text { par) } & \$ 180,000 \\\text { Paid-in capital in excess of par } & 350,000 \\\text { Retained earnings } & 220,000\\\text { Total stockholders' equity }&\$750,000\end{array}$ On January 2, 20X6, Company S sold 1,000 additional shares to noncontrolling shareholders in a public offering for $50 per share. Stroller's net income for 20X6 was 80,000. Poncho uses the simple equity method to record its investment in Stroller.
Required:
a.
Prepare Poncho's journal entry to adjust its Investment in Stroller account on January 2, 20X6. Assume that Poncho has $500,000 additional paid-in capital.
b.
Determine the carrying value of Poncho's Investment in Stroller account on December 31, 20X6.

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Definitions:

Factor Analysis

A statistical technique based on correlations between several measures, which may be explained in terms of underlying factors.

Analyze Group Means

Involves statistical evaluations of average values (means) obtained from different groups in an experimental study, to infer differences or similarities.

Variables

Elements, factors, or conditions that can change or vary, often considered in research or experiments to observe effects on outcomes.

Structure

The arrangement of and relations between the parts or elements of something complex, forming a coherent whole.