Pig Corporation paid $1,274,000 cash for 70 percent of the common stock of Set Corporation on June 1, 2011. The assets and liabilities of Set were fairly valued, and any fair value/book value differential is goodwill. Data related to the stockholders’ equity of Set are as follows:
Stockholders’ Equity December 31, 2010 | |
Common stock, $10 par | $1,000,000 |
Retained earnings | 480,000 |
Total stockholders’ equity | $1,480,000 |
Income and Dividends—2011 | |
Net income (earned evenly throughout the year) | $ 240,000 |
Dividends (declared and paid in equal amounts in January, April, July, and October) | 120,000 |
REQUIRED
1. Determine the following:
a. Goodwill from the investment in Set
b. Pig’s income from Set for 2011
c. The Investment in Set account balance at December 31, 2011
2. Prepare the workpaper entries needed to consolidate the financial statements for 2011. Add the preacquisition income to Retained Earnings—Set.
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