Question

The Thomas Corporation acquired 80 percent of the 100,000 outstanding voting shares of Colby, Inc., for $7.10 per share on January 1, 2020. The remaining 20 percent of Colby's shares also traded actively at $7.10 per share before and after Thomas' acquisition. An appraisal made on that date determined that all book values appropriately reflected the fair values of Colby’s underlying accounts except that a building with a 5-year future life was undervalued by $50,000 and a fully amortized trademark with an estimated 10-year remaining life had a $80,000 fair value. At the acquisition date, Colby reported common stock of $100,000 and a retained earnings balance of $292,000.

	Thomas Corporation				Colby INC.
Sales	$	(761,000	)		$	(396,750	)
Cost of goods sold		267,000				124,000
Operating expenses		258,000				114,750
Dividend income		(16,000	)			0
Net income	$	(252,000	)		$	(158,000	)
Retained earnings, 1/1/21	$	(744,000	)		$	(362,000	)
Net income (above)		(252,000	)			(158,000	)
Dividends declared		80,000				20,000
Retained earnings, 12/31/21	$	(916,000	)		$	(500,000	)
Current assets	$	294,000			$	161,000
Investment in Colby, Inc.		568,000				0
Buildings and equipment (net)		810,000				483,000
Trademarks		164,000				180,000
Total assets	$	1,836,000			$	824,000
Liabilities	$	(600,000	)		$	(224,000	)
Common stock		(320,000	)			(100,000	)
Retained earnings, 12/31/21 (above)		(916,000	)			(500,000	)
Total liabilities and equities	$	(1,836,000	)		$	(824,000	)

At year-end, there were no intra-entity receivables or payables.

Requirement A: Prepare a worksheet to consolidate these two companies as of December 31, 2021. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Input all amounts as positive values.)

Thomas CORPORATION AND Colby, INC. Consolidation Worksheet For Year Ending December 31, 2021 Accounts Thomas Corporation Colby Inc. Consolidation Entries Noncontrolling Interest Consolidated Totals Debit Credit Sales $(761,000) $(396,750) Cost of goods sold 267,000 124,000 Operating expenses 258,000 114,750 Dividend income (16,000) 0 Separate company net income $(252,000) $(158,000) Consolidated net income NI attributable to noncontrolling interest NI attributable to Thomas Corp. Retained earnings, 1/1/21 $(744,000) $(362,000) Net income (252,000) (158,000) Dividends declared 80,000 20,000 Retained earnings, 12/31/21 $(916,000) $(500,000) Current assets $294,000 $161,000 Investment in Colby, Inc. 568,000 0 Buildings and equipment (net) 810,000 483,000 Trademarks 164,000 180,000 Goodwill 0 0 Total assets $1,836,000 $824,000 Liabilities $(600,000) $(224,000) Common stock (320,000) (100,000) Retained earnings, 12/31/21 (above) (916,000) (500,000) NCI in Colby, 1/1 NCI in Colby, 12/31 0 Total liabilities and equities $(1,836,000) $(824,000) $0 $0

Requirement B:

Prepare a 2021 consolidated income statement for Thomas and Colby. (Enter all amounts as positive values.)

	Thomas CORPORATION AND colby , INC. Consolidated Income Statement For Year Ending December 31, 2021 Total expenses 0 $0 To noncontrolling interest To Holtz Corporation $0

Required C: If instead the noncontrolling interest shares of Colby had traded for $5.22 surrounding Thomas’ acquisition date, what is the impact on goodwill?

Goodwill

(increases or decreases)

to

$

Answer 1