On May 1, 2016, Tole Company acquires a 80% interest in Marco Company for $400,000. The fair value of the NCI is $100,000. The following determination and distribution of excess schedule is prepared:

Goodwill, applicable to the parent's interest ($80,000), will be amortized over 15 years for tax purposes only. Tole Company and Marco Company have the following separate income statements for the year ended December 31, 2018:

During 2018, Marco Company pays cash dividends of $25,000.
Prepare the entry to record income tax payable on each company's books. Assume a 30% corporate income tax rate.

Transcribed Image Text:

Determination and Distribution of Exbess Schedule Implied Company Fair Value Parent Price NCI Value $500,000 $300,000 $ 400,000 Fair value of subsidiary... Less book value of interest acquired $400,000 $100,000 Retained earnings . Total equity... 100,000 $400,000 $400,000 80% 20% Book value Excess offair value over book value Adjustment of identifiable accounts: $320,000 $ 80,000 80,000 $ 20,000 $100,000 Amortization Worksheet Adiustment r Year Life Goodwill. . _ _ _ .._ .___ $100,000 debit D Tole Com Marco Compan $750,000 $600,000 350,000 $310,000 $250,000 140,000 Sales Less cost of goods sold 440,000 250,000 17,500 Gross proft Income before dividends... Dividends received Income before tax ...$127,500 $110,000