On January 1, 2017, Parton Corporation acquired an 80% interest in Sandra Corporation for $200,000. Sandra's net assets on this date had a book value of $150,000 and a fair value of $210,000. The excess of fair value over book value at acquisition was attributable to $30,000 of understated plant assets with a remaining useful life of five years from January 1, 2017, and $30,000 to an understated patent with a remaining economic life of six years from January 1, 2017. Separate incomes of Parton and Sandra for 2017 were $300,000 and $50,000, respectively.

Instruction:

a.   Compute goodwill at January 1, 2017 under the parent company theory and the entity theory.

b.   Determine consolidated net income and minority interest income for 2017 under the parent company theory and the entity theory.

Answer rating: 100% (QA)

This is an advanced accounting problem relating to the acquisition method of accounting which is use... View the full answer