Problem

The stockholders’ equities of Pal Corporation and its 80 percent-owned subsidiary, Sow Cor...

The stockholders’ equities of Pal Corporation and its 80 percent-owned subsidiary, Sow Corporation, on December 31, 2011, are as follows (in thousands):

 

Pal

Sow

Common stock, $10 par

$10,000

$6,000

Retained earnings

4,000

3,000

Total Stockholders’ Equity

$14,000

$9,000

Pal’s Investment in Sow account balance on December 31, 2011, is equal to its underlying book value. On January 2, 2012, Sow issued 60,000 previously unissued common shares directly to Pal at $25 per share.

REQUIRED

1. Calculate the balance of Pal’s Investment in Sow account on January 2, 2012, after the new investment is recorded.


2. Determine the goodwill, if any, from Pal’s purchase of the 60,000 new shares.

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Solutions For Problems in Chapter 8