Pal Corporation paid $1,190,000 cash for 70 percent of the outstanding voting stock of Sin Corporation on January 2, 2012, when Sin's stockholders' equity consisted of $1,000,000 of $10 par common stock and $500,000 retained earnings. The book values of Sin's assets and liabilities were equal to their fair values on this date.
During 2012, Pal Corporation had separate income of $600,000 and paid dividends of $300,000. Sin's net income for 2012 was $180,000 and its dividends were $100,000. At December 31, 2012, the stockholders' equities of Pal and Sin were as follows (in thousands):
Pal Sin
Common stock ($10 par) ............ $2,800 ................. $1,000
Retained earnings ..................... 900 .................. 580
Total stockholders' equity ........... $3,700 ................. $1,580
There were no intercompany transactions between Pal Corporation and Sin Corporation during 2012. Pal uses the equity method of accounting for its investment in Sin.
REQUIRED
1. Assume that Pal Corporation uses parent-company theory for preparing consolidated financial statements for 2012. Determine the following amounts:
a. Pal Corporation's income from Sin for 2012
b. Goodwill that will appear in the consolidated balance sheet at December 31, 2012
c. Consolidated net income for 2012
d. Noncontrolling interest expense for 2012
e. Noncontrolling interest at December 31, 2012
2. Assume that Pal Corporation uses entity theory for preparing consolidated financial statements for 2012. Determine the following amounts:
a. Pal Corporation's income from Sin for 2012
b. Goodwill that will appear in the consolidated balance sheet at December 31, 2012
c. Total consolidated income for 2012
d .Noncontrolling interest share for 2012
e. Noncontrolling interest at December 31, 2012