18. Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2017, for $190,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2018, Milani purchased an additional 30 percent of Seida for $600,000 which resulted in significant influence over Seida. On that date, the fair value of Seidaâs common stock was $2,000,000 in total. Seidaâs January 1, 2018, book value equaled $1,850,000, although land was undervalued by $120,000. Any additional excess fair value over Seidaâs book value was attributable to a trademark with an 8-year remaining life. During 2018, Seida reported income of $300,000 and declared and paid dividends of $110,000. Prepare the 2018 journal entries for Milani related to its investment in Seida.
18. Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2017, for $190,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2018, Milani purchased an additional 30 percent of Seida for $600,000 which resulted in significant influence over Seida. On that date, the fair value of Seidaâs common stock was $2,000,000 in total. Seidaâs January 1, 2018, book value equaled $1,850,000, although land was undervalued by $120,000. Any additional excess fair value over Seidaâs book value was attributable to a trademark with an 8-year remaining life. During 2018, Seida reported income of $300,000 and declared and paid dividends of $110,000. Prepare the 2018 journal entries for Milani related to its investment in Seida.
Related questions
| On January 1, 2014, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,428,700 in cash. The price paid was proportionate to Sellingerâs total fair value, although at the acquisition date, Sellinger had a total book value of $1,710,000. All assets acquired and liabilities assumed had fair values equal to book values except for a patent (six-year remaining life) that was undervalued on Sellingerâs accounting records by $321,000. On January 1, 2015, Palka acquired an additional 25 percent common stock equity interest in Sellinger Company for $548,125 in cash. On its internal records, Palka uses the equity method to account for its shares of Sellinger. |
| During the two years following the acquisition, Sellinger reported the following net income and dividends: |
| 2014 | 2015 | |
| Net income | $ 495,000 | $ 615,000 |
| Dividends | 190,000 | 220,000 |
| a. | Prepare Palkaâs journal entry to record its January 1, 2015, acquisition of an additional 25 percent ownership of Sellinger Company shares. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) |
| b. | Prepare a schedule showing Palkaâs December 31, 2015, equity method balance for its Investment in Sellinger account. (Amounts to be deducted should be indicated with a minus sign.) |
For Part A I know the amount of Cash in the trransaction should be $548,125
However I am unsure of the amount to debit for the investment in S and what to credit for the Additional paid-in capital. I thought it would be 70% of the book value, but was wrong.
