Homework Answers
Hello,
The answers has been derived in the following manner:
1) While Parent & Sub Inc. are being consolidated, their fixed asset values will be added together.
Fixed Asset values:
Parent Inc.: 1,00,000
(+)Sub Inc.: 54,000 (Taken at revalued figure) = 1,54,000/-
2) Using the same principles as in question 1, the value of current assets will be combined value of current assets of both the entities i.e. 60,000 (Parent Inc) + 26,000 (Revalued figure of Sub Inc) = 86,000/-
3) The Goodwill of any Enterprise is determined by how much extra value is being paid over & above its worth.
Formula for the same is: Goodwill = Fair value of Assets (-) Fair value of Liabilities of acquired entity (-) Purchase consideration
Hence Goodwill= ((Fair value of current assets + Fair value of current liabilities) - ( Current liabilities + Bonds payable)) - purchase consideration
Goodwill = (( 26,000 + 54,000) - ( 35,000 + 12,000)) - 40,000 = 7,000/-
4) The answer will be 1,21,000.
The Shareholder's equity section of combined entity will be the combined value of share capital & retained earnings (As purchase consideration is paid in cash, It won't be added to shareholder's equity section).
Hence the Value of combined shareholder's equity section = (90,000 + 8,000) + (12,000 + 11,000) = 1,21,000/-
Hope you'll find it useful :)
If any doubts remains, you can ask in comment section for the same.
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