The balance of Pam Corporation's investment in Sun Company account at December 31, 2015, was $436,000, consisting of 80 percent of Sun's $500,000 stockholders' equity on that date and $36,000 goodwill. On May 1, 2016, Pam sold a 20 percent interest in Sun (one-fourth of its holdings) for $130,000. During 2016, Sun had net income of $150,000, and on July 1, 2016, Sun declared dividends of $80,000.
REQUIRED:
(Solve using both the actual date of sale assumption and the beginning-of-the-year sale assumption.)
1. Determine the gain or loss on sale of the 20 percent interest.
2. Calculate Pam's income from Sun for 2016.
3. Determine the balance of Pam's Investment in Sun account at December 31, 2016.