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.

1. Did Paul pay a premium for its shares in Sam? Answer"yes" or "no"and show your work.

2. Determine the December 31, 2019 Investment in Sam balance, assuming Paul applied the (Full) Equity Method.

3. Determine the December 31, 2019, year-end balance of the Non-Controlling Interest.

Answer rating: 100% (QA)

1 No Paul Inc does not paid any premium for its shares since the purchased capital 500000 is less th... View the full answer