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Peak Entertainment acquires 60 percent of its subsidiary Saddlestone Inc. on January 1, 2016. In preparing to consolidate Peak and Saddlestone at December 31, 2016, we assemble the following information:
•Value of stock given up to acquire Saddlestone: $10,000,000.
•Direct merger costs: $250,000.
•Saddlestone’s stockholders’ equity at acquisition: $7,200,000.
•Fair value of earnings contingency agreement to be paid in cash: $300,000.
•Fair value of previously unrecorded identifiable intangibles (5-year life): $2,000,000.
•Goodwill and identifiable intangibles are not impaired in 2016.
•Fair value of the 40 percent noncontrolling interest at acquisition: $6,500,000.
•Saddlestone’s net income in 2016: $3,000,000.
•Saddlestone’s dividends declared and paid in 2016: $1,000,000.
•Peak uses the complete equity method to report the investment on its own books.
Required
(a) Calculate total goodwill and its allocation to the controlling and noncontrolling interests.
I have computed total good will to be 7,600,000 but I cannot figure out the total good will allocated to non controlling interest or to Peaks. I assumed it would be 60% and 40% but its not
ParticularsDirect merger costsadd: price paid to acquiretotal purchase considerations’s stockholders equitytotal goodwillp’s goodwillgoodwill to non controlling interest amoun t250000…
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