On January 1,2016,Pippert Company Acquired 80% of Skyler Company's Common

question 29

Essay

On January 1,2016,Pippert Company acquired 80% of Skyler Company's common stock for $210,000 and 70% of Skyler's preferred stock for $80,000.Skyler Company reported the following stockholders' equity on this date:
The preferred stock is cumulative,nonparticipating,and callable at 104% of par value plus dividends in arrears.On January 1,2016,dividends were in arrears for one year.Any difference between the implied value of the preferred stock and its book value interest is to be allocated to other contributed capital.
Changes in Skyler Company's retained earnings during 2016 and 2017 were as follows:
Required:
A.Compute the difference between the implied value and book value interest acquired for the investment in preferred stock.
B.Compute the balance in the Investment in Preferred Stock account on December 31,2017.
C.Compute the amount of Skyler Company's net income that will be included in the controlling interest in consolidated net income for 2017.

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Definitions:

Partnership Agreement

A formal contract between two or more parties who agree to manage and operate a business together, outlining the responsibilities, profit share, and rules for the partnership.

Personal Assets

Assets owned by an individual, including both tangible items like real estate and vehicles, and intangible items like stocks and bonds.

Capital

Financial assets or resources that individuals or organizations use to fund their operations and invest in their businesses.

Unlimited Personal Liability

A legal obligation where an individual's personal assets can be used to satisfy the debts and liabilities of the business.