Computations for interim purchase (investee has a discontinued operations loss)
Kuma Corporation paid $600,000 in cash for a 40 percent interest in Sachi Corporation on April 1, 2016, when Sachi’s common stock was at $1,000,000 and the book value of its net assets equaled fair value. During 2016, Sachi declared and paid dividends of $30,000 each quarter on March 1, June 1, September
1, and December 1. Sachi’s net income in 2016 was reported as follows:
Income from continuing operations $250,000
Less: Loss of discontinued operations (50,000)
Net income $200,000
REQUIRED: Determine the following items for Kuma:
1. Goodwill or gains on the bargain purchase
2. Income from Sachi for 2016
3. Investment in Sachi account balance at December 31, 2016
4. Kuma’s equity in Sachi’s net assets at December 31, 2016
5. The amount of discontinued operations loss that Kuma will show on December 31, 2016