On January 1, 2011, Riney Co. owned 80% of the common stock of Garvin Co. On tha

Question

On January 1, 2011, Riney Co. owned 80% of the common stock of Garvin Co. On that date, Garvin's stockholders' equity accounts had the following balances: The balance in Riney's Investment in Garvin Co. account was $552,000, and the non-controlling interest was S138,000. On January 1, 2011, Garvin Co. sold 10,000 shares of previously unissued common stock for $15 per share. Riney did not acquire any of these shares. What is the balance in Investment in Garvin Co. after the sale of the 10,000 shares of common stock? Please provide detailed calculation.

Explanation / Answer

No Of Shares Issued by Gravin Co. 50000 No. Of Shares Held by Riney Co. (80%) 40000 No. of Shares Issued by Gravin Co. 10000 Total No. of Shares Issued 60000 After Issue, Gravin's Stockholder's Equity Account: Particulars Amount Common Stock ($5 par Value) $300,000 Additional Paid Up Capital $110,000 Shares Premium (10000 Shares @ $10 per Share) $100,000 Retained Earnings $330,000 Total stockholder's equity $840,000 Balance in Riney's Investment in Gravin Co. $560,000 ($840000 X 40000/60000)

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