Pine Company purchased a 60% interest in the Scent Company on January 1, 20X1 for $360,000. On that date, the stockholders' equity of Scent Company was $450,000. Any excess cost on 1/1/X1 was attributable to goodwill. Pine purchased another 20% interest on January 1, 20X4 for $200,000. On January 1, 20X4, Scent Company's stockholders' equity was $700,000, the entire increase due to retained earnings. The goodwill balance on the December 31, 20X4, balance sheet is ____.
A)$100,000
B)$60,000
C)$0
D)$150,000

Question

Quizplus · Accepted Answer

Purchase January 1, 20X1:
Determination and Distribution of Excess Schedule:
 11eb11de_92f3_4359_ad38_3fa57dfd371d_TB2014_00 If a company already owns a controlling interest and then purchases additional shares, as Pine did in this case, that purchase is viewed as a retirement of shares and nor gain or loss, nor goodwill is recognized for any difference between the price paid for those shares and their book value. The excess is first used to reduce existing paid-in capital in excess of par, and any balance is a debit to retained earnings.

Pine Company Purchased a 60% Interest in the Scent Company