Question

On January 1, 2016, Uncle Company purchased 80 percent of Nephew Company’s capital stock for $606,400 in cash and

other assets. Nephew had a book value of $735,000 and the 20 percent noncontrolling interest fair value was $151,600 on that date. On January 1, 2015, Nephew had acquired 30 percent of Uncle for $349,000. Uncle’s appropriately adjusted book value as of that date was $1,130,000.

Separate operating income figures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $30,000 in dividends to shareholders each year and Nephew distributes $4,000 annually. Any excess fair-value allocations are amortized over a 10-year period.

Uncle Nephew

Year Company Company

2016 $ 117,000   $ 41,400  

2017   124,000     56,400  

2018  

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