Assignment 6 (Chapter 8)

Johannes Inc. acquired 80 percent of Corner Brook Ltd. common shares on January 1, Year 4, for $720,000. At that date, the fair value of the non-controlling interest was $180,000. Corner Brook’s balance sheet contained the following amounts at the time of the combination:


Cash	$	60,000	Accounts Payable	$	100,000
Accounts Receivable		130,000	Bonds Payable		600,000
Inventory		30,000	Common Shares ($10 par value)		400,000
Construction Work in Progress		940,000	Retained Earnings		500,000
Other Assets (net)		440,000
Total Assets	$	1,600,000	Total Liabilities & Equities	$	1,600,000

During each of the next three years, Corner Brook reported net income of $100,000 and paid dividends of $40,000. On January 1, Year 6, Johannes sold 8,000 of the Corner Brook shares for $240,000 in cash. Johannes used the equity method in accounting for its ownership of Corner Brook.

Required:
(a) Compute the balance in the investment account reported by Johannes on January 1, Year 6, before its sale of shares. (Omit $ sign in your response.)

(b) Prepare the entry recorded by Johannes when it sold the Corner Brook shares. (If no entry is required for a transaction/event, select “No journal entry required” in the first account field.)

(c) Calculate consolidated net income attributable to the noncontrolling interest for Year 6 and noncontrolling interest at the end of Year 6. (Omit $ sign in your response.)

Related Assignment solution: (Solution) MOS4465 Assignment 7 (Chapter 9)