puffin industries acquired 90 percent of sunset coast digital s stock on december 31 4373080

Puffin Industries acquired 90 percent of Sunset Coast Digital’s stock on December 31, 2011, for $3,150,000. At that time, Sunset Coast’s stockholders’ equity totaled $1,400,000, and the estimated fair value of the noncontrolling interest was $350,000. Sunset Coast’s inventory (LIFO) was overvalued by $500,000 and its plant assets (10-year life) were overvalued by $1,000,000. The remaining excess of fair value over book value is attributed to undervalued identifiable intangible assets being amortized over 20 years. Sunset Coast depreciates plant assets and amortizes intangibles by the straight-line method. During the next three years Sunset Coast reported total income of $850,000 and paid out 50% in dividends. Puffin carries its investment in Sunset Coast using the complete equity method. Sunset Coast’s inventory increased each year since it was acquired by Puffin, and Sunset Coast’s reported net income for 2014 was $200,000. Required a. Compute Puffin’s 2014 equity method income accrual and the noncontrolling interest in net income for 2014. b. Compute the balance in the investment in Sunset Coast account at December 31,2014, after all equity method entries have been booked. c. Compute the balance of noncontrolling interest, reported on the December 31,2014, consolidated bal¬ance sheet. d. Prepare the working paper eliminating entries needed in consolidation at December 31,2014. View Solution:
Puffin Industries acquired 90 percent of Sunset Coast Digital s stock

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