On 1/1/2016, XYZ Corporation purchased 75% of the outstandingvoting stock of Sally Corporation for $2,400,000 paid incash. On the date of the acquisition, Sally’sshareholders’ equity consisted of the following:
Common stock, $10par $1,000,000
APIC 600,000
RetainedEarnings 800,000
TotalSE $2,400,000
The excess fair value of the net assets acquired was assigned10% to undervalued Inventory (sold in 2016), 40% to undervalued PPEassets with a remaining useful life of 8 years, and 50% toGoodwill.
Comparative trial balances of XYZ Corporation and SallyCorporation at December 31, 2020, are as follows:
| California | San Diego |
Other assets – net | 3,765,000 | 2,600,000 |
Investment in Sally | 2,340,000 | - |
Expenses (including cost of sales) | 3,185,000 | 600,000 |
Dividends | 500,000 | 200,000 |
| 9,790,000 | 3,400,000 |
Common Stock, $10 par value | (3,000,000) | (1,000,000) |
APIC | (850,000) | (600,000) |
Retained earnings | (1,670,000) | (800,000) |
Sales revenues | (4,000,000) | (1,000,000) |
Income from Sally | (270,000) | - |
| (9,790,000) | (3,400,000) |
Required:
Determine the amounts that would appear in the consolidatedfinancial statements of XYZ Corporation and its subsidiary for eachof the following items:
- Goodwill at December 31, 2020. (2 points)
- Income to Non-controlling interest for 2020. (3 points)
- Consolidated retained earnings at December 31, 2019. (2points)
- Consolidated retained earnings at December 31, 2020. (2points)
- Controlling share of consolidated Net Income for 2020. (3points)
- Non-controlling interest at December 31, 2020. (3 points)
