On July 1,2010,Parslow Corporation acquired a 75% interest in Sanderson Corporation for $150,000.Sanderson's net assets on this date had a book value of $140,000 and a fair value of $160,000.The excess of fair value over book value at acquisition was due to understated plant assets with a remaining useful life of five years from July 1,2010.Separate net incomes (excluding investment income)of Parslow and Sanderson for 2011 were $400,000 and $20,000,respectively.
Required:
1.Compute goodwill at July 1,2010 under the parent company theory and the entity theory.
2.Determine consolidated net income and noncontrolling interest share for 2011 under the parent company theory and the entity theory.

Question

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The Answer of On July 1,2010,Parslow Corporation acquired a 75% interest in Sanderson Corporation for $150,000.Sanderson's net assets on this date had a book value of $140,000 and a fair value of $160,000.The excess of fair value over book value at acquisition was due to understated plant assets with a remaining useful life of five years from July 1,2010.Separate net incomes (excluding investment income)of Parslow and Sanderson for 2011 were $400,000 and $20,000,respectively.
Required:
1.Compute goodwill at July 1,2010 under the parent company theory and the entity theory.
2.Determine consolidated net income and noncontrolling interest share for 2011 under the parent company theory and the entity theory.

On July 1,2010,Parslow Corporation Acquired a 75% Interest in Sanderson