Proud Corporation acquired 80 percent of Spirited Companys voting stock on January 1, 20X3, at...
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Proud Corporation acquired 80 percent of Spirited Companys voting stock on January 1, 20X3, at underlying book value. The fair value of the noncontrolling interest was equal to 20 percent of the book value of Spirited at that date. Assume that the accumulated depreciation on depreciable assets was $56,000 on the acquisition date. Proud uses the equity method in accounting for its ownership of Spirited. On December 31, 20X4, the trial balances of the two companies are as follows: Proud Corporation Spirited Company Item Debit Credit Debit Credit Current Assets $ 253,000 $168,000 Depreciable Assets 511,000 305,000 Investment in Spirited Company 128,640 Depreciation Expense 24,000 14,000 Other Expenses 144,000 89,000 Dividends Declared 54,000 18,200 Accumulated Depreciation $ 194,000 $ 84,000 Current Liabilities 61,000 41,000 Long-Term Debt 149,440 187,200 Common Stock 181,000 85,000 Retained Earnings 265,000 55,000 Sales 233,000 142,000 Income from Spirited Company 31,200 $1,114,640 $1,114,640 $594,200 $594,200
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