On 1/1/X1, P acquired 80% of S for $800,000 when S's equity included $500,000 capital stock and $500,000 of Retained Earnings. During years X1 and X2 S earned $100,000 and $120,000, respectively. In both years, S paid $20,000 of dividends.
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Tomate, Inc., a tomato ketchup manufacturing company, was producing at 75 percent of its production capacity, which was 500,000 bottles a year. A retail giant from a different region offered to buy 150,000 bottles of ketchup at $2 per bottle.
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