On January 1,20X7,Water Limited purchased 700,000 shares of Bottle Inc.for $2.8 million.On January 1,20X9,Water sold 150,000 shares of Bottle for $700,000.During the entire period Bottle had 1,000,000 shares outstanding.Water accounts for its investment in Bottle under the equity method.The following information was extracted from the financial records of Bottle:

All net identifiable assets had a fair value equal to their carrying value on the date of acquisition except the buildings.There is no goodwill reported on the separate entity financial statements of Water or Bottle.There have been no intercompany transactions between Water and Bottle.
Required:
Calculate the balances of following accounts on the consolidated statement of financial position at December 31,20X10,under the parent-company extension method:
a.Goodwill
b.NCI
Determine the adjustment to equity required.

Question

On January 1,20X7,Water Limited purchased 700,000 shares of Bottle Inc.for $2.8 million.On January 1,20X9,Water sold 150,000 shares of Bottle for $700,000.During the entire period Bottle had 1,000,000 shares outstanding.Water accounts for its investment in Bottle under the equity method.The following information was extracted from the financial records of Bottle:
  
All net identifiable assets had a fair value equal to their carrying value on the date of acquisition except the buildings.There is no goodwill reported on the separate entity financial statements of Water or Bottle.There have been no intercompany transactions between Water and Bottle.
Required:
Calculate the balances of following accounts on the consolidated statement of financial position at December 31,20X10,under the parent-company extension method:
a.Goodwill
b.NCI
Determine the adjustment to equity required.

Quizplus · Accepted Answer

The Answer is Measure: Determine goodwill
Measure: Determine goodwill Building Fair value increment Amortization per year: Fair value increment = $1,200,000 / 30 = $40,000 annually. a. Note- this balance will not change as percentage ownership is added as long as control is maintained. b) Adjustment to equity:

Measure: Determine goodwill Building Fair value increment Amortization per year: Fair value increment = $1,200,000 / 30 = $40,000 annually. a. Note- this balance will not change as percentage ownership is added as long as control is maintained. b) Adjustment to equity:

Building Fair value increment Amortization per year:
Fair value increment = $1,200,000 / 30 = $40,000 annually.
a.
Measure: Determine goodwill Building Fair value increment Amortization per year: Fair value increment = $1,200,000 / 30 = $40,000 annually. a. Note- this balance will not change as percentage ownership is added as long as control is maintained. b) Adjustment to equity:

Note- this balance will not change as percentage ownership is added as long as control is maintained.
b)
Measure: Determine goodwill Building Fair value increment Amortization per year: Fair value increment = $1,200,000 / 30 = $40,000 annually. a. Note- this balance will not change as percentage ownership is added as long as control is maintained. b) Adjustment to equity:

Adjustment to equity: Measure: Determine goodwill Building Fair value increment Amortization per year: Fair value increment = $1,200,000 / 30 = $40,000 annually. a. Note- this balance will not change as percentage ownership is added as long as control is maintained. b) Adjustment to equity:

On January 1,20X7,Water Limited Purchased 700,000 Shares of Bottle Inc