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NCI refers to the amount of shares held by a company other than the parent company if the company does not acquire 100% of equity. Normally these shareholders have a minority interest in the company and are valued at fair value on the date of acquisition. It is the percentage of shares which are held by other shareholder, For example Company X owns of 80% shares of Y limited, then 20% is non controlling interest because that share must be held by other shareholders of Y limited. After the date of acquisition NCI can be valued the at fair value of subsidiary net assets plus the proportionate amount of share in net income minus the amount of dividend post acquisition date.
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- On July 1, 2020, Blue George Company purchased 25% interest of Pink Conrad for P150,000. Blue George incurred transaction cost equal to 5% on the transaction price. On October 1, 2020, Pink Conrad declared dividends of P80,000. At the end of 2020, Pink Conrad reported net income of P200,000. On January 1, 2021, the fair values of Pink Conrad's net assets were as follows:Current Assets - P100,000;Equipment - P150,000;Patent – P120,000;Land - P50,000;Buildings - P300,000; andLiabilities - P80,000. On January 1, 2021, Blue George Company purchased 50% interest of the Pink Conrad Company by issuing 100,000 shares of its P1 par value stock when the fair value of the stock was P6.20. Pink Conrad paid for the legal fees of P10,000 and securities SEC registration of P20,000 which was reimbursed by Blue George. The Patent of Pink Conrad refers to the technology purchased by Pink Conrad from Blue George years ago. Blue George had an outstanding unearned revenue related to the Patent amounting to…On January 1, 2020, Hand acquires 40% ownership of Foot. At the acquisition date, Foot had equipment with a book value of $100,000 and a fair value of $160,000. The remaining useful life is 4 years. What is the amount of amortization (debit to equity earnings) that will be recognized in 2020?On July 1, 2020, Blue George Company purchased 25% interest of Pink Conrad for P150,000. Blue George incurred transaction cost equal to 5% on the transaction price. On October 1, 2020, Pink Conrad declared dividends of P80,000. At the end of 2020, Pink Conrad reported net income of P200,000. On January 1, 2021, the fair values of Pink Conrad's net assets were as follows:Current Assets - P100,000;Equipment - P150,000;Patent – P120,000;Land - P50,000;Buildings - P300,000; andLiabilities - P80,000. On January 1, 2021, Blue George Company purchased 50% interest of the Pink Conrad Company by issuing 100,000 shares of its P1 par value stock when the fair value of the stock was P6.20. Pink Conrad paid for the legal fees of P10,000 and securities SEC registration of P20,000 which was reimbursed by Blue George. The Patent of Pink Conrad refers to the technology purchased by Pink Conrad from Blue George years ago. Blue George had an outstanding unearned revenue related to the Patent amounting to…
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- Bentley Company acquires Joslyn Company debt securities on Januart 1, 2020 for $15,000. Upon acquisition, Bentley Company designates the securities as available for sale. Bentley Company sells the Joslyn Company debt securities for $20,000 on Febraury 1, 2021. The following table summarizes the fair value of the Joslyn Company debt securities over the holding period. Date Fair value 1/1/2020 $15,000 12/31/2020 18,000 2/1/2021 20,000 How should Bentley Company record the: Acquisition of the debt securities Subsequent changes in fair value of the debt securities Disposition of the debt securities?Choco, Inc. acquires 15% of Cake Corporation on January 1, 2020, for $130,000 when the book value of Cake’s net assets was $760,000. During 2020 Cake reported net income of $150,000 and paid dividends of $32,000. Cake has a land that are undervalued by $30,000 in January 1, 2020. On January 1, 2021, Choco purchased an additional 30% of Cake for $280,000, giving Choco the ability to significantly influence the operating policies of Cake. During 2021, Cake reported net income of $180,000 and paid dividends of $32,000. Cake’s land was undervalued by $32,000 in January 1, 2021. Any excess of cost over book value is attributable to Trademark which has a useful life of 8 years in January 1, 2020. During 2020 and 2021, there was no fair value adjustment for Cake (there was no changes in fair value). And during 2020 and 2021, there was no changes in net assets. 5) In 2021, using the equity method, what is the balance of the investment account in Cake at December 31, 2020? Show your…On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company's capital stock for $510,000 in cash and other assets. Nephew had a book value of $617,500, and the 20 percent noncontrolling interest fair value was $127,500 on that date. On January 1, 2021, Nephew had acquired 30 percent of Uncle for $330,250. Uncle's appropriately adjusted book value as of that date was $1,067,500. Separate operating income figures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $20,000 in dividends to shareholders each year and Nephew distributes $5,000 annually. Any excess fair-value allocations are amortized over a 10-year period. Uncle Year Company 2019 $ 92,000 2020 2021 159,000 167,000 a. b. Nephew Company $ 31,800 48,400 51,400 a. Assume that Uncle applies the equity method to account for this investment in Nephew. What is the subsidiary's income recognized by Uncle in 2021? b. What is the net income attributable to the…