On January 1, 2018, Lime acquired 80,000 common shares of Stone's for $900,000. On that day, Stone's balance sheet showed the following shareholders' equity: $2 Cumulative preferred shares, 20,000 shares issued Common stock, 100,000 shares issued Retained Earnings $120,000 $500,000 $50,000 Total Equity $670,000 * Stone's preferred share dividends were two years in arrears on that date. Stone's Fair Values approximated its book values on that date with the following exceptions: Inventory had a fair value that was $30,000 higher than its book value. Plant and equipment had a fair value $10,000 lower than their book value. The plant and equipment had an estimated remaining useful life of 10 years from the date of acquisition. Required: Compute the amount of Goodwill on the date of the acquisition. 1. Allocation of equity between common stock and preferred stock: (5) Particulars Total Preference shares Common Stock 3 Pref. shares Arrear Dividends Common Stock Total Retained Earnings Total and allocated 2. Calculate the amount of Goodwill: (4) Answer: Purchase price Implied Value: Less: Carrying amount of net assets Acquisition differential Less: Allocated to Inventory Plant Goodwill 3. Calculate the value of Non-controlling interest on January 1,2018: (2) Answer: Here NCI will be 20% of net assets 20% of 670,000+900,000= 314,000 NCI=314,000 4. Let us assume that in addition to 80% investment in Stone's common share, Lime purchased 4000 preferred shares for $ 40,000. Calculate acquisition differential for the purchase of preferred shares. (4)