On January 1, 2015, Peking Company purchased a 20% interest in Sara Company by cash. The purchase price of $196,800 reflected an assessment that all of Sara's accounts were fairly valued within the company's accounting records (i.e., book values are approximate to the fair values). Peking appropriately applied the equity method to this investment.
On Sep. 30, 2015, Peking acquired an additional 70% interest in Sara and provided the following fair value assessments of Sara's ownership components:
Cash transferred by Peking for 70% interest $1,176,000
Fair value of Peking's 20% previous ownership 280,000
Fair value of Noncontrolling interest's 10% 140,000
Total acquisition-date fair value $1,596,000
As of Sep 30, 2015, Sara's book value was 1,240,000. Peking assessed a $160,000 value to an unrecorded customer contract recently negotiated by Sara. The customer contract is anticipated to have a remaining life of 4 years. Sara's other assets and liabilities were judged to have fair values equal to their book values. Any remaining excess fair value was attributed to goodwill. Peking elects to continue applying the equity method to this investment for internal reporting purpose.
Sara reported net income of $80,000 for 2015 and paid annual cash dividends of $24,000 on Oct 15, 2015. Sara's income was assumed to be earned evenly throughout the year and no changes in Sara's stocks have occurred.
A. Prepare all journal entries by Peking (parent company) on its internal accounting records (General Journal) for 2015 related to its investments in Sara company.
B. Calculate the balances for noncontrolling interest as of Dec 31, 2015.