Accounting On October 1, 2019, Paul Inc. acquired 80% of Sam Co. by paying $500,000 cash. At that date, Sam reported a Common Stock account balance of $100,000, Additional Paid in Capital balance of $100,000, and Retained Earnings, as of October 1, 2019, of $250,000. On that date, the fair value of Sam Co. was appraised at $600,000. All excess fair value from the acquisition is attributed to an unrecorded Customer List with a 10 year remaining life. Sam Co. earned $85,000 and declared dividends of $30,000 in 2019. Paul Inc. had income of $210,000 through its own operations (i.e., excluding investment income from Sam Co.) in 2019. Assume that earnings and dividends are earned/declared evenly throughout the year. Required: a) Did Paul pay a premium for its shares in Sam? Answer 'yes' or 'no' and show your work. b) Determine the December 31, 2019 Investment in Sam balance, assuming Paul applied the (Full) Equity Method. c) Determine the December 31, 2019 year-end balance of the Non-Controlling Interest.

Accounting On October 1, 2019, Paul Inc. acquired 80% of Sam Co. by paying $500,000 cash. At that date, Sam reported a Common Stock account balance of $100,000, Additional Paid in Capital balance of $100,000, and Retained Earnings, as of October 1, 2019, of $250,000. On that date, the fair value of Sam Co. was appraised at $600,000. All excess fair value from the acquisition is attributed to an unrecorded Customer List with a 10 year remaining life. Sam Co. earned $85,000 and declared dividends of $30,000 in 2019. Paul Inc. had income of $210,000 through its own operations (i.e., excluding investment income from Sam Co.) in 2019. Assume that earnings and dividends are earned/declared evenly throughout the year. Required: a) Did Paul pay a premium for its shares in Sam? Answer 'yes' or 'no' and show your work. b) Determine the December 31, 2019 Investment in Sam balance, assuming Paul applied the (Full) Equity Method. c) Determine the December 31, 2019 year-end balance of the Non-Controlling Interest.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 25E

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