The solution must be under the GAAP standards On July 1, 2017, ABC Inc. acquired 80% of XYZS Co. by paying $500,000 in cash. The amount paidrepresents a good estimate of the acquisition date fair value. XYZS Co. reported a Common Stockaccount balance of $140,000 (unchanged for the whole year) with no additional paid in capital.Retained Earnings at January 1st 2017 was $235,000. Any excess fair value paid is attributed topatent with a remaining useful life of 10 years. ABC Inc. uses the equity method to record theinvestment in XYZS Co.On October 1, 2018, ABC Inc. acquired another 10% of XYZS Co. for $70,000. Net Income forXYZS Co for 2017 is $120,000 and dividends are $30,000. In 2018, XYZS Co. earned $126,000 withdividend payments of $42,000. Assume net income and dividends occur evenly during the year.ABC had income of $308,000 in 2017 and $364,000 in 2018. ABC also paid dividends of $50,000each in 2017 and 2018.Required:1. Prepare the necessary entry(ies) to record the purchase on July 1st 2017.2. Prepare the necessary entry(ies) to record the purchase on October 1st, 2018.3. What is the amount of subsidiary net income allocated to the non-controlling interest for2018?

The equity method of accounting is the approach for recording the investment made by a company in…

Answered: The solution must be under the GAAP…

The solution must be under the GAAP standards

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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