On January 1, 2020, P company acquires 90 percent of the outstanding common stock of S company, in exchange for $1,710,000 cash. At the acquisition date, S company's total fair value, including the noncontrolling interest, was assessed at $1,900,000. Also at the acquisition date, S company's book value was $725,000. (common stock 400,000, additional paid-in capital 60,000, retained earnings 265,000). P company observed that S company had developed internally a customer base with an asset fair value of $800,000 that was not reflected on S company's books. The remaining useful life of the customer base is ten years.
Book value Fair value Customer base 0 800000 For internal reporting purposes, P company employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2020, for both companies. At year-end, there were no intra-entity receivables or payables. P company Scompany ($120,000) ($120,000) 40,000 40,000 Revenues Cost of goods sold Depreciation expense Amortization expense Equity in income of Gardena Net income $121500) ($437,000) 0 ($215,000) Retained earnings (1/1/2020) Net income Dividends declared Retained earnings (12/31/2020) ($330,000) ($437,000) 350.000 ($265,000) ($215,000) 25.000 1,854,000 0 Current assets Investment in Scompany Trademark Property and equipment (net) Patents Total assets Accounts payable Common stock Additional paid-in capital Retained earnings (12/31/2020) Total liabilities and equities ($900,000) ($300,000) ($400,000) ($60,000) 1. What is the goodwill of Parent at acquisition? Your answer: fair value of sub-book value of sub-undervalued FV of customer base 2. What is the amount of Non-Controlling Interest at acquisition (1/1/2020)? Your answer: 3. The consolidation JE D to eliminate any dividend earned from Subsidiary during 2020 (consolidation JED) Your answer: Dr. Cr. 4. The consolidation JE Sto eliminate subsidiary's stockholders'equity at December 31, 2020 (consolidation JE S) Your answer: Dr. Cr. 5. What is the consolidated balance for investment at December 31, 2020? Your answer: 6. What is the consolidated balance for equiy in income of Scompany at December 31, 2020? Your answer: 7. What is the consolidated balance for dividend declared at December 31, 2020? Your answer: 8. What is the consolidated net income attributable to controlling interests (consolidated entity) of Scompany at December 31, 2020? Your answer: 9. What is the consolidated balance for additional paid in capital at December 31, 2020? Your answer: 10. What is the consolidated balance for common strook at December 31, 2020? Your answer: 11. What is the consolidated balance for sales at December 31, 2020? Your answer: 12. What is the consolidated balance for cost of goods sold at December 31, 2020? Your answer: 13. What is the consolidated balance for beginning balance of retained earnings in 2020? Your answer: Hint: It is in the information provided 14. What is the total fair value of subsidiary at the acquision date (1/1/2020)? Your anwer: 15. Is customer base undervalued asset or overvalued asset? Your answer: 16. Is incremental fair value on customer base debited or credited in Consolidation Journal Entry A? Your
