part 1 On January 1, Year 1, Giant bought 80% of the shares of Son for...

part 1

On January 1, Year 1, Giant bought 80% of the shares of Son for $20 million. At the time, the fair value of the 20 % noncontrolling interest was $4 million.

The equity of Son on the date of acquisition was $16 million. Its common stock =$1 million and retained earnings =$15 million. All assets and liabilities had fair value equal to book value, except Son owned a building with a fair value $ of $30 million and a book value of $25 million. It has 10 years of remaining life and no salvage value.

During Year 1, Son reported revenues of $5 million and expenses of $3 million. It declared dividends of $300,000. Giant had net income from its own operations (ignoring its interest in Son) of $50 million.

As of the date of acquisition, what consolidation entry or entries are needed? Show your work.

part 2

At the end of the year, what is the amount of income that is allocable to the controlling interest, that is, the shareholders of the parent company?

Expert Solution

Date	Particulars	Debit ($)	Credit ($)
	Investment in son	20000000
	Bank		20000000
	(To record investment made in Son company)

Entry on the year end:
Date	Particulars	Debit ($)	Credit ($)
	Bank	300000
	Dividend from son		300000
	(To record dividend received from son)
	Dividend from son	300000
	Investment in son		300000
	(To record acwuisition dividend reducing the value of the investment)
	Goodwill	2900000
	Profit & loss		2900000
	(To record goodwill created)

	Pariculars	Date of Acquistion	Date of consolidation	Retained Earnings
	Equity Shares	12800000	12800000	-
	Retained Earning	3200000	3200000	-
	Profits	-	1700000	1700000
	Revaluation of Building	5000000	5000000
	Depreciation on the aove	-	-500000	-500000
	Net assets	21000000	22200000	1200000
	Percentage	80%	20%	80%
	Share of Net assets	16800000	4440000	960000
	Rectified value of investment	19700000
	Goodwill	2900000

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