Patane Corporation Acquired 80% of the Outstanding Voting Common Stock

question 53

Essay

Patane Corporation acquired 80% of the outstanding voting common stock of Sanlon Corporation on January 1,2014,for $500,000.Sanlon Corporation's stockholders' equity at this date consisted of $250,000 in Capital Stock and $100,000 in Retained Earnings.The fair value of Sanlon's assets was equal to the book value of the assets except for land with a fair value $40,000 greater than its book value,and marketable securities with a fair value $50,000 greater than its book value.Sanlon also had a valuable patent with a fair value of $25,000 and a book value of zero because its development costs were expensed as incurred.The fair value of Sanlon's liabilities is $10,000 higher than the $40,000 book value.
Required:
Calculate the amount of goodwill under the parent company and entity theories of consolidation.

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Definitions:

Invoice

A document issued by a seller to a buyer, detailing products or services provided, prices, and terms of payment.

Cheque

A document that is written, dated, and contains a signature, instructing a bank to pay a certain amount of money to either the person holding it or to an individual named in the document.

Credited

The action of officially recognizing or adding an amount to an account, often referring to the depositing of funds or acknowledgment of income earned.

Account

A record or statement of financial transactions pertaining to an individual, business, or other entity.