P company paid $3,600,000 in cash, to acquire 90%of S company on January 1, 2014. The total stockholder's equity of S company at that time was $5,000,000. Below are the assets and liabilities of S company book value that differ with the fair value on 1/1.2014: - inventory (sold in the current year) was overvalued by $200,000. - lands was overvalued by $500,000. -equipment remaining life of 4 years was undervalued by $400,000 - building (remaining life of 5 years) was overvalued by $750,000. - notes receivable (due in 4 years) was undervalued by $200,000. S company declared a dividend of $150,000, for March and June 2014 each. S company net income for the year was $1,000,000. Required: 1- calculate Goodwill that should be reported in the consolidated balance sheet. 2- calculate income from S company for 2014. * M

P company paid $3,600,000 in cash, to acquire 90%of S company on January 1, 2014. The total stockholder's equity of S company at that time was $5,000,000. Below are the assets and liabilities of S company book value that differ with the fair value on 1/1.2014: - inventory (sold in the current year) was overvalued by $200,000. - lands was overvalued by $500,000. -equipment remaining life of 4 years was undervalued by $400,000 - building (remaining life of 5 years) was overvalued by $750,000. - notes receivable (due in 4 years) was undervalued by $200,000. S company declared a dividend of $150,000, for March and June 2014 each. S company net income for the year was $1,000,000. Required: 1- calculate Goodwill that should be reported in the consolidated balance sheet. 2- calculate income from S company for 2014. * M

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

3. P company paid $3,600,000 in cash, to acquire 90%of S company on January 1, 2014. The total
stockholder's equity of S company at that time was $5,000,000. Below are the assets and
liabilities of S company book value that differ with the fair value on 1/1.2014:
- inventory (sold in the current year) was overvalued by $200,000.
- lands was overvalued by $500,000.
-equipment remaining life of 4 years was undervalued by $400,000
- building (remaining life of 5 years) was overvalued by $750,000.
- notes receivable (due in 4 years) was undervalued by $200,000.
S company declared a dividend of $150,000, for March and June 2014 each. S company net
income for the year was $1,000,000.
Required: 1- calculate Goodwill that should be reported in the consolidated balance sheet.
2- calculate income from S company for 2014. * A

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