On January 1, 2017,Palka, Inc., acquired 70 percent of the outstanding shares ofSellinger Company for $1,392,300 in cash. The price paid wasproportionate to Sellinger’s total fair value, although at theacquisition date, Sellinger had a total book value of $1,700,000.All assets acquired and liabilities assumed had fair values equalto book values except for a patent (six-year remaining life) thatwas undervalued on Sellinger’s accounting records by $279,000. OnJanuary 1, 2018, Palka acquired an additional 25 percent commonstock equity interest in Sellinger Company for $536,250 in cash. Onits internal records, Palka uses the equity method to account forits shares of Sellinger.
During the two yearsfollowing the acquisition, Sellinger reported the following netincome and dividends:
| 2017 | 2018 |
| Net income | $ | 472,500 | | $ | 622,500 | |
| Dividendsdeclared | | 150,000 | | | 180,000 | |
|
Show Palka’s journalentry to record its January 1, 2018, acquisition of an additional25 percent ownership of Sellinger Company shares.
Prepare a scheduleshowing Palka’s December 31, 2018, equity method balance for itsInvestment in Sellinger account.
Show Palka’s journalentry to record its January 1, 2018, acquisition of an additional25 percent ownership of Sellinger Company shares. (If no entry isrequired for a transaction/event, select "No journal entryrequired" in the first account field.)
Prepare a scheduleshowing Palka’s December 31, 2018, equity method balance for itsInvestment in Sellinger account. (Amounts to be deducted should beindicated with a minus sign.)
