Measurement of Goodwill
Rank Corporation acquired 60 percent of Fresh Company’s stock on December 31, 20X4. In preparing the consolidated financial statements at December 31, 20X4, goodwill of $240,000 was reported. The goodwill is attributable to Rank’s purchase of Fresh shares, and the parent company approach was used in determining the amount of goodwill reported.
Required
Determine the amount of goodwill to be reported under each of the following consolidation alternatives:
a. Proprietary theory.
b. Entity theory.
c. Current accounting practice.
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