Reference no: EM133528685
Question: On January 1, 2008, Pancho Corporation acquired 75,000 common shares of Serape Ltd. for $990,000. At the time, Serape had 100,000 common shares outstanding. All identifiable assets had a fair value equal to book value on the date of acquisition, with the exception of equipment. Pancho used the cost method to account for this transaction.
On January 1, 2013, Pancho purchased an additional 20,000 shares of Serape Ltd. for $340,000. Again, all identifiable assets had a fair value equal to book value on the date of acquisition with the exception of equipment.
The following information was extracted from the financial records of Serape Ltd.:
| |
January 1, 2008 |
January 1, 2013 |
December 31, 2013 |
| Net book value of equipment |
$300,000 |
$254,000 |
$235,000 |
| Fair value of equipment |
$405,000 |
$310,000 |
$300,000 |
| Remaining useful life of equipment |
10 |
5 |
4 |
| Common shares |
$400,000 |
$400,000 |
$400,000 |
| Retained earnings |
$800,000 |
$1,100,000 |
$1,500,000 |
On December 31, 2013, Pancho shows $1,200,000 as the net book value of its own equipment.
Required:
Calculate the amount of Goodwill for each transaction and the balance to be shown on the consolidated balance sheet of Pancho Corporation for "Equipment" as at December 31, 2013