1. Marshall Company acquires 85% of Smith Company in a purchase. The total consideration is the best approximation of the fair value of the acquisition. As of the date of purchase, the fair value of the assets less the liabilities is greater than the underlying book values.

a. Will Marshall be required to prepare consolidated financial statements? As part of the answer, what is the first condition for consolidated financial statements to be prepared?

b. If Goodwill is recorded, how will the amount be determined?