Correction of consolidated net income
Liong Corporation paid $2,500,000 in cash for an 80 percent interest in Taro Corporation on January 1, 2016, when the book value of Taro’s net assets was $2,250,000. Some additional information is given below:
a Land was overvalued by $100,000.
b Equipment with a five-year remaining useful life was undervalued by $150,000.
c Taro’s net income was $300,000.
d Liong’s net income was $1,440,000, including an income of $240,000 from Taro.
REQUIRED
1. Calculate the goodwill that should appear in the consolidated balance sheet of Liong and Subsidiary at December 31, 2016.
2. Calculate consolidated net income for 2016.