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Question : 13) On January 1, 2011, Paisley Incorporated paid $300,000 for

13) On January 1, 2011, Paisley Incorporated paid $300,000 for 60% of Smarnia Company's outstanding capital stock. Smarnia reported common stock on that date of $250,000 and retained earnings of $100,000.  Plant assets, which had a five-year remaining life, were undervalued in Smarnia's financial records by $10,000. Smarnia also had a patent that was not on the books, but had a market value of $60,000. The patent has a remaining useful life of 10 years. Any remaining fair value/book value differential is allocated to goodwill. Smarnia's net income and dividends paid the first three years that Paisley owned them are shown below.

Net Dividends

IncomePaid

201180,00030,000

201290,00010,000

201360,00020,000

Requirement 1: Calculate the noncontrolling interest share in Smarnia's income for each of the three years.

Requirement 2: Calculate the noncontrolling interest that should be reported on the consolidated balance sheet at the end of each of the three years.

Requirement 3: Assuming that Paisley uses the equity method to record their investment in Smarnia, calculate the ending balance in the Investment in Smarnia account for each of the three years.

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