please help me solve the rest. Thank you. comec, you dy hot have completed every

Question

please help me solve the rest. Thank you.

comec, you dy hot have completed everything 3 value 16.67 points Major Corporation acquired 90 percent of Lancaster Company's voting common stock on January 1, 20X1 for $499,500. At the time of the combination, Lancaster reported common stock outstanding of $121,000 and retained earnings of $389,000, and the fair value of the noncontrolling interest was $55,500. The book value of Lancaster's net assets approximated market value except for patents that had a market value of $45,000 more than their book value. The patents had a remaining economic life of five years at the date of the business combination. Lancaster reported net income of $65,000 and paid dividends of $24,000 during 20X1 Required a. What balance did Major report as its investment in Lancaster at December 31, 20X1, assuming Major uses the equity method in accounting for its investment? Answer is complete and correct. alance in investment account s 528,300

Explanation / Answer

Balance in investment account Lancaster Company’s common stock, January 1, 20X1 $121,000 Lancaster Company’s retained earnings, January 1, 20X1 $389,000 Book value of Lancaster’s net assets $510,000 Proportion of stock acquired 90% Book value of Lancaster's shares purchased by Major Corp. $459,000 Excess of acquisition price over book value $40,500 Fair value of consideration given $499,500 Add: Share of Lancaster's net income ($65,000 x 90%) $58,500 Less: Amortization of patents ($45,000 / 5) x 90% $8,100 Less: Dividends paid by Lancaster ($24,000 x 90%) $21,600 Balance in investment account, December 31, 20X1 $528,300 Basic elimination entry Common Stock Dr. $121,000 Retained Earnings Dr. $389,000 Income from Lancaster Co. Dr. $58,500 NCI in NI of Lancaster Co. Dr. $6,500 Dividends declared Cr. $24,000 Investment in Lancaster Co. Cr. $499,500 NCI in NA of Lancaster Co. Cr. $51,500 Amortized excess value reclassification entry Patents Dr. $9,000 Income from Lancaster Co. Cr. $8,100 NCI in NI of Lancaster Co. Cr. $900 Excess value (differential) reclassification entry Patents Dr. $36,000 Investment in Lancaster Co. Cr. $32,400 NCI in NA of Lancaster Co. Cr. $3,600

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