Equity Method Acct Problem

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2104. Demers reported common stock of $300,000, and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on annual review, goodwill has not been impaired.

Demers earns income and pays dividends as follows:

2014 2015 2016

Net income $100,000 $120,000 $130,000

Dividends $40,000 $50,000 $60,000

Assume the EQUITY METHOD is applied.

Compute Pell’s investment account balance in Demers at December 31, 2016

Select one:

A. $763,200

B. $620,000

C. $639,000

D. $643,200

Compute the non-controlling interest in the net income of Demers at December 31, 2015

Select one:

A. $18,400

B. $14,400

C. $12,600

D. $22,600

E. $24,000

Compute the non-controlling interest in Demers at December 31, 2014.

Select one:

A. $118,600

B. $112,000

C. $100,000

D. $135,600

E. $137,000

 

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