Puddle Incorporated Purchased an 80% Interest in Soake Company, Located

question 35

Essay

Puddle Incorporated purchased an 80% interest in Soake Company, located in England. Puddle paid $1,560,000 on January 1, 2014, at a time when the book values of Soake equaled the fair values. Any excess cost/book value differential was attributed to a patent with a five-year remaining useful life. Soake's books are kept in the functional currency, pounds. A summary of Soake's equity is shown below for the first year that Puddle had ownership interest.
Required:
Determine Puddle's income from Soake for 2014, and the balance of Puddle's Investment in Soake account at December 31, 2014. Soake's books are kept in pounds, which is the functional currency.

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Definitions:

Total Variable Costs

The sum of all costs that vary with the level of production or sales, such as materials and labor.

Volume Of Activity

A term related to the level of business operations or transactions undertaken by a company within a specific period.

Variable Cost

Costs that change in proportion to the level of goods or services produced by a business.

Production Level

The quantity of goods a company produces within a specified period, usually in relation to its capacity.