On January 1, 2016, Uncle Company purchased 80 percent of Nephew Company’s capital stock for $704,000 in cash and

other assets. Nephew had a book value of $844,000 and the 20 percent noncontrolling interest fair value was $176,000 on that date. On January 1, 2015, Nephew had acquired 30 percent of Uncle for $305,000. Uncle’s appropriately adjusted book value as of that date was $950,000.

Separate operating income figures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $25,000 in dividends to shareholders each year and Nephew distributes $6,000 annually. Any excess fair-value allocations are amortized over a 10-year period.

Uncle Company Nephew Company

Year 2016$84,000 $41,800 

2017 130,000  58,800 

2018 214,000  62,600 

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