Question

1. Correction of consolidated net income Pop Corporation paid $1,800,000 for a 90 percent interest in Son Corporation on January 1, 2019: Son's total book value was $1,800,000. The excess was allocated as follows: $60,000 to undervalued equipment with a three-year remaining useful life and $140,000 to goodwill. The income statements of Pop and Son for 2019 are summarized as follows (in thousands): Pop Son Sales $4.000 1,600 Income from Son 180 Cost of sales (2,000) (800) Depreciation expense (400) (240) Other expenses (800) (360) Net income S980 S200 REQUIRED: 1. Calculate the goodwill that should appear in the consolidated balance sheet of Pop and Subsidiary at December 31, 2019. 2. Calculate consolidated net income for 2019.

Answer 1

(A)	Goodwill as at 31st Dec 2019 should be 1,40,000
(B)		Consolidated Net Income for 2019
							Total Amount(In thousands)
		Sales			4000+1600	=	5600
		Cost of sales		2000+800	=	-2800
		Depreciation expense	400+240	=	-640
		Other Expense		800+360-180	=	-980
		Net Income			=	1180
	Notes:	Income from Son amounting 180 in books of pop and
		other Expenses amounting 180 in books of son
		is elimination entry hence not considered in
		consolidated Income