Bell Company acquires 80% of Demers Company for $500,000 on January 1, 2009. Demers reported common stock

Question:

"Bell Company acquires 80% of Demers Company for $500,000 on January 1, 2009. Demers reported common stock of $300,000 and retained earnings of $200,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. Demers earns income and pays dividends as follows:

2009 net income $100000 dividends 40000

2010 net income $120000 dividends 50000

2011 net income $130000 dividends 60000

Assume the equity method is applied.

(a) Compute Bell's investment in Demers at December 31, 2011.

(b) Compute Bell's income from Demers for the year ended December 31, 2011.

(d) Compute the non-controlling interest of Demers at December 31, 2011.

Goodwill
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of... Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...