On January 1, 2019, Pace Company issued common stock with a fair value of $1,000,000 plus paid cash of $1,280,000 for 60% of Setter Corporation’s outstanding common stock. At that date, the fair value...

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Answer To: On January 1, 2019, Pace Company issued common stock with a fair value of $1,000,000 plus paid cash...

Mohammad Wasif answered on Apr 07 2021
162 Votes
Tab 1
    1. Analysis of Investment by Pace in Setter
    Fair value of Pace stocks    $1,000,000
    Cash co
nsideration    $1,280,000
    Consideration for the 60% shares in the Setter Corp    $2,280,000
    Controlling interest is 60%    60%
    Non-controlling interest is 40%    40%
    At 01/01/2019
    Net Assets of Setter Corp    $3,400,000
    Customer list not considered    $200,000
    Building & equipment undervalued    $120,000
    Hence, the correct Net assets of setter Corp     $3,720,000
    On comparing purchase consideration with Net assets of Setter, we found that there is excess of payment by $ 48,000
    Explanation:
    Goodwill    $48,000
Tab 2
    2. Equity method entries for investment during...
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