On January 1, 2018, Lime acquired 80,000 common shares of Stones for $900,000. On that day, Stone's balance sheet showed the following shareholders' equity: $ 2 Cumulative preferred shares, 20,000 shares issued $120,000

Common stock, 100,000 shares issued $500,000

Retained Earnings $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
Pref. shares
Arrear Dividends
Common Stock
Total
Retained Earnings
Total and allocated

Calculation of Goodwill: (5)

Purchase price

Implied Value:

Less: Carrying amount of net assets

Acquisition differential

Less: Allocated to-

Inventory

Plant

Goodwill

2. Calculate the value of Non-controlling interest on January 1,2018: (2)

3.Let us assume that that in addition to 80% investment in Stones common share, Lime purchased 5000 preferred shares for $ 40,000. Calculate acquisition differential for the purchase of preferred shares.(3)