Problem #2: (Based on Exercise E4-2)

Paint Corporation purchased 80 percent of the outstanding voting common stock of Shallow Corporation on January 1, 2011, for $620,000 cash. Shallows balance sheets on this date and on December 31, 2011, are as follows:

Shallow Corporation Balance Sheet
	January 1st	December 31st
Inventory	$100,000	$40,000
Other Current assets	$100,000	$160,000
Plant Assets-Net	$420,000	$460,000
Total Assets	$620,000	$660,000
Liabilities	$100,000	$120,000
Common Stock	$320,000	$320,000
Retained Earnings	$200,000	$220,000
Total Liabilities + OE	$620,000	$660,000

ADDITIONAL INFORMATION

1. Paint uses the equity method of accounting for its investment in Shallow.

2. Shallows 2011 net income and dividends were $140,000 and $120,000, respectively.

3. Shallow purchases inventory from Paint

4. Shallows inventory, which was sold in 2011, was undervalued by $30,000 at January 1, 2011.

REQUIRED

1. Compute Paints income from Shallow for 2011

2. Compute the non-controlling interest share for 2011

Note: The following must be computed:

Excess of FV over BV

Allocation of Excess (including calculation of Goodwill)

Adjusted Net Income from Subsidiary

Parents & NCI share of Adjusted Net Income