Perry Company purchased 100% of Starling Company on 1/1/20X1. Atthe date of acquisition, the following differences existed:
Starling had a 20-year loan for $500,000. The fair value of theloan was $540,000.
Starling had an unrecorded Patent with an estimated remaininglife of 5 years. The fair value of the patent was $800,000.
Any other differences between book value and fair value wereattributable o goodwill.
At 12/31/20X4, Starling still had the loan and patent thatexisted at the date of acquisition. The following balances are onthe separate company's records (4 years have passed). Both accountsare normal balances.
Perry. Starling. Mathematical Total
Patents. 150,000. -0- 150,000
Loans payable 350,000. 580,000. 930,000
In the year ended 12/31/20X4, Starling reports net income of$820,000 on its separate income statement.
1. On its separate income statement, what will Perry report asequity in income of Starling for the year ended 12/31/20X4?
2. What will be the balance in the Patents account on theconsolidated balance sheet at 12/31/20X4?
3. What will be the balance in the Loans payable account on theconsolidated balance sheet at 12/31/20X4?
