On 1/1/16 Poncho Acquired an 80% Interest in Stroller for $560,000

Essay

On 1/1/16 Poncho acquired an 80% interest in Stroller for $560,000 when Stroller's equity consisted of $530,000 paid-in capital and $100,000 Retained Earnings.Any excess of purchase price over was attributed to goodwill.
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On January 1, 2021, Stroller had the following stockholders' equity:
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$$\begin{array} { l r } \text { Common stock } ( \$ 20 \text { par) } & \$ 180,000 \\\text { Paid-in capital in excess of par } & 350,000 \\\text { Retained earnings } & 220,000 \\\quad \text { Total stockholders' equity } & \$ 750,000 \\\end{array}$$ On January 2, 2021, Company S sold 1,000 additional shares to non-controlling shareholders in a public offering for $50 per share.Stroller's net income for 2021 was 80,000.Poncho uses the simple equity method to record its investment in Stroller.
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Required:
a.Prepare Poncho's journal entry to adjust its Investment in Stroller account on January 2, 2021.Assume that Poncho has $500,000 additional paid-in capital.
b.Determine the carrying value of Poncho's Investment in Stroller account on December 31, 2021.