On January 1, Year 5, Wellington Inc. owned 90% of the outstanding common shares of Sussex Corp. Wellington accounts for its investment using the equity method. The balance in the investment account on January 1, Year 5, amounted to $235,800. The unamortized acquisition differential on this date was allocated entirely to vacant land held by Sussex. The shareholders’ equity of Sussex on January 1, Year 5, was as follows: The shareholders’ equity of Sussex on January 1, Year 5, was as follows: Common shares (7,200 shares outstanding)…. $ 28,000 Retained earnings…………. 134,000 ………………..$162,000 The following events occurred in Year 5: • The net income of Sussex for Year 5 amounted to $36,000, earned equally throughout the year. • On April 1, Year 5, Sussex issued 1,800 shares at a price of $25 per share. Wellington did not acquire any of these shares. • On June 30, Year 5, Sussex paid dividends amounting to $12,000. • On September 15, Year 5, Sussex sold 30% of its vacant land at its carrying amount. • On December 31, Year 5, Wellington sold 648 shares of its investment in Sussex for $22,000. Required: Calculate the following as at December 31, Year 5: (a) The acquisition differential allocated to vacant land and the split in value between the parent and the non-controlling interest. (b) The balance in the investment account, assuming that Wellington is a private company, uses ASPE, and chooses to use the equity method to report its investment in Sussex. (c) The amount of non-controlling interest on the consolidated balance sheet. On January 1, Year 8, Panet Company acquired 40,000 common shares of Saffer Corporation, a public company, for $500,000. This purchase represented 8% of the outstanding shares of Saffer. It was the intention of Panet to acquire more shares in the future in order to eventually gain control of Saffer. View Solution:
On January 1 Year 5 Wellington Inc owned 90 of