Princeton Corporation Acquired the Voting Stock of Sheridan Company on January

Essay

Princeton Corporation acquired the voting stock of Sheridan Company on January 1, 2019 for $50,000 in cash. Sheridan's book value at the date of acquisition was $10,000. Sheridan's net assets were reported at amounts approximating fair value. However, it had previously unreported identifiable intangibles (5-year life, straight-line), valued at $15,000. During 2019, Sheridan reported net income of $3,500 and declared and paid dividends of $200. During 2020, Sheridan reported net income of $4,000 and declared and paid dividends of $200. Goodwill from this acquisition was not impaired in 2019 but was impaired by $300 in 2020. Princeton uses the complete equity method to report its investment in Sheridan on its own books.
Required
a. Calculate equity in net income of Sheridan, reported on Princeton's books, for 2019 and 2020.
b. Calculate the December 31, 2019 and December 31, 2020 balance for Investment in Sheridan, reported on Princeton's books.