On January 1, 2017, Paloma Corporation exchanged $1,710,000 cash for 90 percent of the outstanding voting stock

Question:

On January 1, 2017, Paloma Corporation exchanged $1,710,000 cash for 90 percent of the outstanding voting stock of San Marco Company. The consideration transferred by Paloma provided a reasonable basis for assessing the total January 1, 2017, fair value of San Marco Company. At the acquisition date, San Marco reported the following owners' equity amounts in its balance sheet:

Common stock . . . . . . . . . . . . . . . . . . .$400,000

Additional paid-in capital . . . . . . . . . . . . 60,000

Retained earnings . . . . . . . . . . . . . . . . . .265,000

In determining its acquisition offer, Paloma noted that the values for San Marco's recorded assets and liabilities approximated their fair values. Paloma also observed that San Marco had developed internally a customer base with an assessed fair value of $800,000 that was not reflected on San Marco's books. Paloma expected both cost and revenue synergies from the combination. At the acquisition date, Paloma prepared the following fair-value allocation schedule:

Fair value of San Marco Company . . . . . . . . . . . . . . . . . $1,900,000

Book value of San Marco Company . . . . . . . . . . . . . . . . . . 725,000

Excess fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,175,000

to customer base (10-year remaining life) . . . . . . . . . . . . . . 800,000

to goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 375,000

At December 31, 2018, the two companies report the following balances:

On January 1, 2017, Paloma Corporation exchanged $1,710,000 cash for

At year-end, there were no intra-entity receivables or payables.
a. Determine the consolidated balances for this business combination as of December 31, 2018.
b. If instead the non-controlling interest's acquisition-date fair value is assessed at $167,500, what changes would be evident in the consolidated statements?

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