On 1/1/16 Poncho Acquired an 80% Interest in Stroller for $560,000

question 1

Essay

On 1/1/16 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.
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On January 1, 2021, Stroller had the following stockholders' equity:
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$$\begin{array} { l r } \text { Common stock } ( \$ 20 \text { par) } & \$ 180,000 \\\text { Paid-in capital in excess of par } & 350,000 \\\text { Retained earnings } & 220,000 \\\quad \text { Total stockholders' equity } & \$ 750,000 \\\end{array}$$ On January 2, 2021, Company S sold 1,000 additional shares to non-controlling shareholders in a public offering for $50 per share.Stroller's net income for 2021 was 80,000.Poncho uses the simple equity method to record its investment in Stroller.
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Required:
a.Prepare Poncho's journal entry to adjust its Investment in Stroller account on January 2, 2021.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, 2021.

Comprehend the dynamics of cash flow management, including cash inflows from sales and cash outflows from expenses.

Analyze the impacts of accounts receivable and accounts payable periods on a firm's cash balance and financial operations.

Grasp the concept of budgeting for inventory needs and managing cash to maintain desired inventory levels.

Apply knowledge of sales projections to determine the related costs of goods sold and the required inventory purchases.

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Definitions:

Influence on Price

The ability of buyers or sellers to affect the price of a good or service in the market, often due to factors like monopoly power, supply and demand dynamics, or government intervention.

Economic Losses

Financial losses incurred due to unfavorable business conditions, natural disasters, or other unexpected events that negatively impact the economy.

Implicit Cost

The opportunity cost equal to what a firm must give up in order to use resources it owns, without paying rent or borrowing costs.

Free Entry

A market condition where new participants can enter the industry freely without facing prohibitive barriers to entry.