On January 1, 2020, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed, Inc.,
Question:
On January 1, 2020, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed, Inc., for $1,107,000 in cash and stock options. At the acquisition date, NetSpeed had common stock of $1,150,000 and Retained Earnings of $57,500. The acquisition-date fair value of the 10 percent noncontrolling interest was $123,000. QuickPort attributed the $22,500 excess of NetSpeed's fair value over book value to a database with a five-year remaining life.
During the next two years, NetSpeed reported the following:
| Net Income | Dividends Declared | |||||
| 2020 | $ | 31,500 | $ | 4,500 | ||
| 2021 | 45,000 | 4,500 | ||||
On July 1, 2020, QuickPort sold communication equipment to NetSpeed for $28,500. The equipment originally cost $32,500 and had accumulated depreciation of $5,500 and an estimated remaining life of three years at the date of the intra-entity transfer.
- Compute the equity method balance in QuickPort's Investment in NetSpeed, Inc., account as of December 31, 2021.
- Prepare the worksheet adjustments for the December 31, 2021, consolidation of QuickPort and NetSpeed.
Expert Answer:
