Paul Company acquired 60% of Smith Company for $480,000 on January 1, 2019. On that date the remaining 40% of Smith’s shares had a fair value of $320,000; and Smith’s balance sheet showed $310,000 of contributed capital and $240,000 of retained earnings. At that time, Smith’s equipment was overvalued by $40,000 and buildings were undervalued by $90,000, both having a 10-year remaining life. Any excess consideration transferred over the fair value of Smith’s net assets was attributed to goodwill. Smith reported net income of $170,000 and dividends declared of $70,000 for the year 2020 and retained earnings of $320,000 at the beginning of 2020. Paul’s operating income of 2020 was $480,000. At the end of 2020, the Equipment (net) account in Paul’s and Smith’s books were $260,000 and 132,000, respectively. Required: Assume Paul uses the partial equity method. Calculate the following: 1. Goodwill, 12/31/20: ____________ 2. Paul’s net income, 2020: ____________ 3. Consolidated net income, 2020: _________
Paul Company acquired 60% of Smith Company for $480,000 on January 1, 2019. On that date the remaining 40% of Smith’s shares had a fair value of $320,000; and Smith’s
Required: Assume Paul uses the partial equity method. Calculate the following:
1. Goodwill, 12/31/20: ____________
2. Paul’s net income, 2020: ____________
3. Consolidated net income, 2020: _____________
4. NCI in consolidated net income, 2020: ______________
5. Equipment (net) (in consolidated balance sheet), 12/31/20: ______________
6. Paul’s Investment in Smith (as reported by Paul) at 12/31/20: _____________
7. NCI in net assets of Smith, 12/31/20: ______________
8. Paul’s 2020 net income, had Paul used the cost method: _____________
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