Question

Par Corporation paid $7,200,000 for 360,000 shares of Sun Corporation’s outstanding voting common stock on January 1, 2011, when the stockholders’ equity of Sun consisted of (in thousands):
10% cumulative, preferred stock, $100 par. Liquidation
preference is $105 per share, and 20,000 shares are issued
and outstanding with one year’s dividends in arrears ...... $2,000
Common stock, $10 par, 400,000 shares issued and
outstanding ...................... 4,000
Other paid-in capital ..................... 1,000
Retained earnings ...................... 1,300
Total stockholders’ equity ................... $8,300
During 2011, Sun reported net income of $1,000,000 and declared dividends of $800,000. Any excess of fair value over book value is goodwill, which is not amortized.
REQUIRED: Calculate the following:
1. Goodwill from Par’s acquisition of Sun
2. Par’s income from Sun for 2011
3. Noncontrolling interest share for 2011
4. Noncontrolling interest in Sun at December 31, 2011
5. Par’s Investment in Sun account balance at December 31, 2011

Answer 1

Requirement 1.

Calculation of goodwill (in thousand)
Common stock	$3,600
Other paid in capital	$900
Retained earnings	$990
	$5,490
investment made	$7,200
goodwill	$1,710

Requirement 2 & 3

Sun's Net Income	$1,000
Dividend for pref shares	$200
	$800
par's share percentage	90%
par's share amount	$720
Non Controlling share	$280	($1000-$720)

Requirement 4

Non Controlling interest in sun as at 31/12/11
Pref stock	$2,000
outstanding dividend on above	$200
Common stock	$400
Other paid in capital	$100
Retained earning	$110
Non controlling interest for 2011	$280
	$3,090

Requirement 5

Par's investment in sun as at 31/12/11
investment made	$7,200
share on income of sun for 2011	$720
	$7,920