Par Inc. (Parent) purchased 75% of the outstanding voting shares of Sub Inc. (Subsidiary) for $450,000 on January 1, 2018. On that date, Sub Inc. had common shares of $310,000 and retained earnings worth $170,000. Par Inc. uses the Fair Value Enterprise Method to value the non-controlling interest in Sub Inc. on the acquisition date. (e.g. FVE implied).

The balance sheets of both companies, as well as the Sub's fair values if different from the carrying value are shown below. Additional notes:

• The equipment had a remaining useful life of 8 years (straight line) from the date of acquisition.
• The inventory was sold in the year of the acquisition (e.g. in 2018).
• As of Jan 1, 2018, the bond payable has 9 years until maturity (straight line).
• The patent was generated internally and is not currently on the books of the sub. The useful life of the patent is 12 years from the date of acquisition. FV of the patent is $24,000.

	1-Jan-2018
	Par Inc.	Sub Inc.	Sub Inc.
	(carrying value)	(carrying value)	(fair value)
Cash	$600,000	$415,000
Accounts Receivable	$140,000	$85,000
Inventory	$60,000	$45,000	$55,000
Investment in Sub Inc.	$700,000
Equipment (net)	$50,000	$180,000	$171,000
Land		$115,000
Total Assets	$1,550,000	$840,000
Current Liabilities	$100,000	$280,000
Bonds Payable	$160,000	$80,000	72,000
Common Shares	$800,000	$310,000
Retained Earnings	$490,000	$170,000
Total Liabilities and Equity	$1,550,000	$840,000

The following are the financial statements for both companies for the current fiscal year ended December 31, 2020:

Income Statements – year ended December 31, 2020

	Par Inc.	Sub Inc.
Sales	$700,000	$300,000
Other Revenue	$121,000
Less: Expenses:
Cost of Goods Sold	$240,000	$130,000
Depreciation Expense*	$10,000	$20,000
Interest Expense	$12,000	$40,000
Other Expenses	$4,000	$50,000
Tax expense	$4,000	$10,000
Net Income	$551,000	$50,000

*depreciation and amortization for ALL assets is tracked in the depreciation expense account.

Retained Earnings Statements – at December 31, 2020

	Par Inc.	Sub Inc.
Balance, January 1, 2020	$841,000	$210,000
Net Income	$551,000	$50,000
Dividends	$351,000	$40,000
Balance, December 31, 2020	$1,041,000	$220,000

Par Inc. uses the cost method to account for its investment in Sub Inc. Additional information relevant to the current Year 2020:

• Intercompany sales were made as follows: $180,000 by Par to Sub; and $70,000 by Sub to Par.
• Par rented out a warehouse to Sub during the year for a total of $45,000 (booked in other revenue and other expenses). Any amounts outstanding were paid by Sub before the end of the year.
• $30,000 of inventory sold by Par to Sub remained in Sub’s warehouse at year end (2020).
• $10,000 of inventory sold by Sub to Par remained in Par’s warehouse at year end (2020).
• A total of $12,000 of inventory sold by Par to Sub and $10,000 of inventory sold by Sub to Par remained in the warehouse at the end of 2019.
• Par sold Sub a piece of equipment on January 1, 2019, which resulted in a gain of $20,000. At that time (Jan 1, 2019), the equipment had a useful life of 5 years.
• Par Inc. owed Sub Inc. $35,000 (e.g. account payables) on December 31, 2020.
• Goodwill impairment of $20,000 was required in the year. Impairment is shown as a separate line item on the financial statements.
• Sub paid a dividend to its shareholders of $40,000 in 2020.

Both companies are subject to a tax rate of 40%. The gross profit percentage on sales is 20% for both companies.

REQUIRED: Prepare all calculations.

1. Using your 5 steps, calculate the goodwill on the date of acquisition (Jan 1, 2018). You must show your analysis for all 5 steps of the process (including Table 1).

2. Calculate the value of the NCI on the date of acquisition (Jan 1, 2018). i.e. this is step 6.