Question
On 1/1/2016, California Corporation purchased 75% of the outstanding voting stock of San Diego Corporation for $2,400,000 paid in cash.On the date of the acquisition,
On 1/1/2016, California Corporation purchased 75% of the outstanding voting stock of San Diego Corporation for $2,400,000 paid in cash.On the date of the acquisition, San Diego's shareholders' equity consisted of the following:
Common stock, $10 par$1,000,000
APIC600,000
Retained Earnings800,000
Total SE$2,400,000
The excess fair value of the net assets acquired was assigned 10% to undervalued Inventory (sold in 2016), 40% to undervalued PPE assets with a remaining useful life of 8 years, and 50% to Goodwill.
Comparative trial balances of California Corporation and San Diego Corporation at December 31, 2020, are as follows:
California
San Diego
Other assets - net
3,765,000
2,600,000
Investment in San Diego
2,340,000
-
Expenses (including cost of sales)
3,185,000
600,000
Dividends
500,000
200,000
9,790,000
3,400,000
Common Stock, $10 par value
(3,000,000)
(1,000,000)
APIC
(850,000)
(600,000)
Retained earnings
(1,670,000)
(800,000)
Sales revenues
(4,000,000)
(1,000,000)
Income from San Diego
(270,000)
-
(9,790,000)
(3,400,000)
Required:
Determine the amounts that would appear in the consolidated financial statements of California Corporation and its subsidiary for each of the following items:
1.Goodwill at December 31, 2020. (2 points)
2.Income to Non-controlling interest for 2020. (3 points)
3.Consolidated retained earnings at December 31, 2019. (2 points)
4.Consolidated retained earnings at December 31, 2020. (2 points)
5.Controlling share of consolidated Net Income for 2020. (3 points)
6.Non-controlling interest at December 31, 2020. (3 points)
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