E 11-6 Computations under parent-company, entity, and traditional theories (mid-year acquisition)

Penang Corporation acquires an 80 percent interest in Minang Corporation for $2,400,000 on April 1, 2016, when the book value of Minang’s net assets equals fair value. Minang’s equity on April 1, 2016, consists of $2,000,000 common stock and $500,000 retained earnings. Minang reports net income of $75,000 in 2016, earned evenly throughout the year.

REQuIRED 1. Calculate Minang’s total net assets on April 1, 2016, under equity theory.

2. Determine goodwill under

(a) equity theory,

(b) parent-company theory, and

(c) traditional theory.

3. Determine income from Minang on an equity basis for 2016.

4. Determine the noncontrolling interest in the consolidated balance sheet at December 31, 2016, under entity theory.