20.On April 1, 2010, Parrish Company purchased 90% of the outstanding voting common stock of Hamilton Corporation for $400,000. At that date the fair market value of Hamilton’s assets less liabilities was $200,000. What amount, if any, of goodwill must Parrish recognize in its consolidated balance sheet on December 31, 2010?Show your work.
21.On January 1, 2010, Simpson Company purchased all of the assets and assumed all of the liabilities of Dobson Company for $400,000. Dobson’s balance sheet showed total assets of $450,000 and total liabilities of $210,000 of this date. An appraiser determined all assets except for land are valued at fair market value. The land is worth $20,000 more than its book value.
A.Calculate goodwill in connection with this business combination.
B.Prepare the journal entry to record the combination.
22.On May 6, 2010, Galen Company purchased equity securities. At December 31, 2010, three investments were still owned by Galen. The names, cost, and fair values at December 31, 2010, are indicated below.
Name
|
Acquisition Cost
|
Fair Value
|
Guy Company
|
$10,000
|
$8,000
|
Nordic Company
|
$3,000
|
$4,500
|
Vernon Company
|
$7,000
|
$7,800
|
The investments have clearly determinable fair values. Galen can’t exercise significant influence on any of these investments. Galen has determined that the Guy stock will be held until 2011. Galen intends to sell the Vernon stock by January 2, 2011, for short-term profits. Galen has no idea how long it will hold the Nordic stock. Show how these investments and any related yearend adjustments will be reported by completing the balance sheet below at December 31, 2010.
Balance Sheet at December 31, 2010:
Current Assets
Long-Term Investments
Shareholders’ Equity