Bai Company bought 60% of the outstanding preferred shares of Six Company for $6,500,000 and 70% of its common shares traded for $35,000,000 on January 1, 2012. The shareholders' equity of Six on December 31, 2011 includes the following (in thousands) Preferred stock $10, par value $100, cumulative non- participating dividend, callable at 105 per share Ordinary shares $10 par value Share premium (paid-in capital) Retained earnings Total equity 10,000S 30,000 5,000 15,000 60,000 Determine the fair value / book value difference (goodwill) of Bai's investments in the common stock of Six Total equity=60,000 Less BV preferred 10000*105%=(10500) BV common = 49500 FV = 35,000 /70% = 50000 Goodwill = 500

Bai Company bought 60% of the outstanding preferred shares of Six Company for $6,500,000 and 70% of its common shares traded for $35,000,000 on January 1, 2012. The shareholders' equity of Six on December 31, 2011 includes the following (in thousands) Preferred stock $10, par value $100, cumulative non- participating dividend, callable at 105 per share Ordinary shares $10 par value Share premium (paid-in capital) Retained earnings Total equity 10,000S 30,000 5,000 15,000 60,000 Determine the fair value / book value difference (goodwill) of Bai's investments in the common stock of Six Total equity=60,000 Less BV preferred 10000*105%=(10500) BV common = 49500 FV = 35,000 /70% = 50000 Goodwill = 500

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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