Peter paid cash of $2,000,000 and issued 50,000 shares of its own $5 par value stock with a market value of $10 for 30% interest in Sol Company's outstanding voting stock on January 1, 2013. The book and fair values including amortization data are available as follows for Sol Company (in thousands).
Book Value Fair Value
Cash $3500 $3500
Receivables (net) 4000 4000
Inventory 600 800
Other current Assets 900 780
Land
Equipment (net) (10 yrs.) 1000 1600
Total Assets $10,000 $10,680
Accounts Payable $3600 $3600
Note Payable 4000 3800
Common Stock 2000
Retained Earnings 400
Total L & SE $10,000
Sol Company Realized $800,000 of net income and distributed dividends of $600,000 for the year of 2013.
Required:
1) Show the journal entry to record the investment and prepare an allocation schedule for investment fair/book differences for Peter's investment in Sol Company.
2) What is Peter's income from Sol? (Show calculations)
3) What is the balance in Peter's investment account at the end of 2013? (show calculations)
4) Journalize the entries to account for Peter's investment in Sol Company during 2013.