On January 1, 2017, Happy Inc. purchased 80% of the outstanding common shares of Sad Co. for $400,000. Happy will account for Sad using the Fair Value Enterprise method. The balance sheets for both companies immediately after the transaction appear below. Happy Inc. Sad Co. Book value Fair value Cash $115,000 $30,000 $30,000 a/r 205,000 90,000 90,000 Inventory 160,000 130,000 140,000 Plant and equipment 700,000 560,000 540,000 Land 80,000 90,000 150,000 Investment in Sad Co. 400,000 - - Goodwill - 25,000 - $1,660,000 $925,000 a/p $250,000 $170,000 $170,000 Bonds payable 640,000 450,000 460,000 Common shares 350,000 240,000 R/E 420,000 65,000 $1,660,000 $925,000 a) Calculate goodwill using fair values. b) Calculate goodwill using net book values, including allocation of the acquisition differential. You must also calculate the value of non-controlling interest in this calculation. c) Prepare a consolidated balance sheet. Your statement must be in good form. Marks will be deducted for poor presentation. Please note that the above balance sheets are for your information and are not considered to be “good form.”

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Solution a Sol Goodwill using Fair value Consideration Fair value of Net identifia... View the full answer