Question

Pony Corporation acquired 90 percent of Saddle Corporation's common stock on September 30, 20X8 for $225,000. At that date, the fair value of the noncontrolling interest was $25,000. On January 1, 20X8, Saddle reported the following stockholders' equity balances:

 

Common Stock ($5 par value)	$	100,000
Additional Paid-In Capital		25,000
Retained Earnings		75,000
Total Stockholders' Equity		200,000

 

 

Saddle reported net income of $80,000 in 20X8, earned uniformly throughout the year, and declared and paid dividends of $10,000 on June 30 and $30,000 on December 31, 20X8. Pony reported retained earnings of $250,000 on January 1, 20X8, and had 20X8 income of $120,000 from its separate operations. Pony paid dividends of $50,000 on December 31, 20X8. Pony accounts for its investment in Saddle Corporation using the fully adjusted equity method.

 

1.    Based on the information provided, what is the consolidated net income reported for the year 20X8?

A) $120,000

B) $138,000

C) $140,000

D) $192,000

 

 

 

 

 

2.    Based on the information provided, what is the consolidated income to the controlling interest reported for the year 20X8?

A) $192,000

B) $138,000

C) $140,000

D) $120,000

 

3.    Based on the information provided, what is the amount of consolidated retained earnings as of December 31, 20X8?

A) $340,000

B) $250,000

C) $338,000

D) $388,000

 

4.    Based on the information provided, what is the balance of Pony's investment in Saddle Corporation as of December 31, 20X8?

A) $216,000

B) $225,000

C) $213,000

D) $215,000