Pathmos Inc. acquires 70% of Getfert Company for $420,000. In its single financial statements Pathmos accounts for
Question:
Pathmos Inc. acquires 70% of Getfert Company for $420,000. In its single financial statements Pathmos accounts for this investment using the equity method. The remaining of 30% of Getfert’s outstanding shares continue to trade at a collective value of $174,000. On the acquisition date, Getfert has the following accounts.
Getfert | Book Value | Fair Value |
Current assets | 210,000 | 210,000 |
Land | 170,000 | 180,000 |
Buildings | 300,000 | 330,000 |
Liabilities | -280,000 | -280,000 |
The buildings have a 10y remaining life. In addition, Getfert holds a patent worth $140,000 that has a 5 year remaining life but is not recorded on its financial records. At the end of the year, the two companies report the following balances:
Pathmos | Getfert | |
Revenues | -900,000 | -600,000 |
Expenses | 600,000 | 400,000 |
Equity in Getfert income | ? |
Q1.
Compute goodwill allocation to the controlling and non-controlling interest
Q2.
Assume that the acquisition took place on Jan. 1. What amounts would appear in a consolidated income statement for this year?
Q3.
Assume that the acquisition took place on Apr. 1. Getfert’s revenues and expenses occurred uniformly throughout the year. What amounts would appear in a consolidated income statement for this year?
Fundamental Managerial Accounting Concepts
ISBN: 978-0078110894
6th Edition
Authors: Edmonds, Tsay, olds