FINANCE : GOODWILL DETERMINATION
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- 5. Determination of Goodwill
Suppose the investment in Tar Sands, Development was $340,000 instead of $300,000 as stated. The fair market values of Tar Sands’ assets and liabilities were equal to their book values. Would the consolidated income differ? How? Be as specific as possible. Would the consolidated balance sheet differ? How? Be as specific as possible.
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| BC mining (Parent) | Tar Sands Development (subsidiary) |
Balance sheets, December 31, 20X0 |
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Assets | $1,000,000 | $550,000 |
Liabilities to creditors | $400,000 | $250,000 |
Stockholders' equity | 600,000 | 300,000 |
Total liabilities and stockholders' equity | $1,000,000 | $550,000 |
Income statement for 20X1 |
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Revenue and other income | $5,450,000 | $1,100,000 |
Expenses | 5,100,000 | 950,000 |
Net Income | $350,000 | $150,000 |
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- 10 years ago