Question 15.4: On 1 January 2009 Parker Company acquired 30 percent of Prin...
On 1 January 2009 Parker Company acquired 30 percent of Prince Inc. common shares for the cash price of €500,000 (both companies are fictitious). It is determined that Parker has the ability to exert significant influence on Prince’s financial and operating decisions. The following information concerning Prince’s assets and liabilities on 1 January 2009 is provided:
The plant and equipment are depreciated on a straight-line basis and have 10 years of remaining life. Prince reports net income for 2009 of €100,000 and pays dividends of €50,000. Calculate the following:
1. Goodwill.
2. Balance in the investment in associate (Prince) at the end of 2009.
Prince, Inc | Book Value | Fair Value | Difference |
Current assets | € 100,000 | € 100,000 | 0 |
Plant and equipment | \underline{1,900,000} | \underline{2,200,000} | \underline{300,000} |
€ 2,000,000 | € 2,300,000 | € 300,000 | |
Liabilities | \underline{800,000} | \underline{800,000} | \underline{0} |
Net assets | € 1,200,000 | € 1,500,000 | € 300,000 |
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