On January 1, 2012, Par Company purchased 8,000 shares of Sub Inc. (total shares issued 10,000) for
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Question:
On January 1, 2012, Par Company purchased 8,000 shares of Sub Inc. (total shares issued 10,000) for $500,000 and uses the equity method to account for its investment in Sub Inc. On the acquisition date, acquisition differential totalled $60,000 all allocated to capital assets with a remaining useful life of four years.
During 2012, Sub had net income of $180,000 (earned evenly over the year) and on June 1, 2012, paid dividends of $40,000.
On August 1, 2012, Par sold 2,000 of the 8,000 shares that it held in Sub for proceeds of $140,000.
Required:
a. Prepare the Par’s journal entry for the sale of the shares on August 1, 2012.
b. What will the balance in the investment account be at December 31, 2012?
Expert Answer:
Req A Percentage acquired 800010000 80 Share in net income of Sub Inc as of August 1 2012 Net income ... View the full answer
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