On January 1, 2011, Par Corporation pays $300,000 for an 80 percent interest in Sal Company, when
Question:
On January 1, 2011, Par Corporation pays $300,000 for an 80 percent interest in Sal Company, when Sal’s net assets have a book value of $275,000 and a fair value of $350,000. The $75,000 excess fair value is due to undervalued equipment with a five-year remaining useful life. Any goodwill is not written off. Separate incomes of Par and Sal for 2011 are $500,000 and $50,000, respectively.
REQUIRED
1. Calculate consolidated net income and noncontrolling interest share under
(a) Parent-company theory and
(b) Entity theory.
2. Determine goodwill at December 31, 2011, under
(a) Parent-company theory and
(b) Entity theory.
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... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Step by Step Answer:
Preliminary computations Parent company theory Cost of 80 interest 300000 Fair value acqu...View the full answer
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Related Book For 
Advanced Accounting
ISBN: 9780132568968
11th Edition
Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith
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