Question
. Choco Co. acquired 60% of Allie Co. (60,000 shares) for $600,000 ( $10/share ) on December 31, 2018. The market value of Allies stock
. Choco Co. acquired 60% of Allie Co. (60,000 shares) for $600,000 ($10/share) on December 31, 2018. The market value of Allies stock was $9/share. Choco uses equity method for its internal reporting of investment in Allie.
12/31/2018 | Choco Co. | Allie Co. | |
| BV | BV | FV |
Current assets | $868,000 | $238,000 | $238,000 |
Equipment [4 years] | 364,000 | 280,000 | 360,000 |
Buildings [12 years] | 574,000 | 210,000 | 270,000 |
Liabilities | $(546,000) | $(168,000) | $(168,000) |
Common stock | (300,000) | (150,000) |
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Additional paid in capital | (460,000) | (350,000) |
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Retained earnings [12/31/18] | (500,000) | (60,000) |
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*note: numbers in this table in () refer to credit balance. |
During 2019, Allie earned net income of $180,000, and paid dividends of $22,000.
1) Calculate goodwill and allocated calculated goodwill between controlling and noncontrolling interest (NCI) on 12/31/2018 (acquisition date)
- Calculate investment in Allie balance on 12/31/2019.
- Prepare consolidation entry A1 for consolidated financial statement ending 12/31/2019.
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- Prepare consolidation entry A2 for consolidated financial statement ending 12/31/2019.
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