Sal Corporations recorded assets and liabilities are equal to their fair values on July 1, 2011, when

Question:

Sal Corporation’s recorded assets and liabilities are equal to their fair values on July 1, 2011, when Pub Corporation purchases 72,000 shares of Sal common stock for $1,800,000. Identifiable net assets of Sal on this date are $1,710,000, and Sal’s stockholders’ equity consists of $800,000 of $10 par common stock and $910,000 retained earnings.

Sal has net income for 2011 of $80,000 earned evenly throughout the year and declares no dividends.

REQUIRED

1. Determine the total value of Sal’s net assets at July 1, 2011, under entity theory.

2. Determine goodwill that would appear in a consolidated balance sheet of Pub Corporation and Subsidiary at July 1, 2011, under

(a) Entity theory,

(b) Parent-company theory, and

3. Determine Pub’s investment income from Sal on an equity basis for 2011.

4. Determine noncontrolling interest in Sal that will be reported in the consolidated balance sheet at December 31, 2011, under entity theory.

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