Accounting for Goodwill
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I don't quite understand the difference between the concepts and I am wondering if you could help me.
1. Problem (you must show your work for this problem, as well as answer the multiple choice question)
On January 1, 2004, Cobb Enterprises acquired 80% of Bob's Bricks Inc.'s outstanding common shares. In acquiring this interest, Cobb paid a total of $3,000,000. Bob Bricks' net assets had a book value of $2,600,000 at the time. A building with a 10 year life and a book value of $200,000 was worth $350,000. Any other excess amount was attributed to goodwill. Cobb reports net income for 2004 of $700,000 (without regard for its ownership in Bob's Bricks), while Bob's Bricks has $350,000 in earnings. For each of the three following concepts, what is the amount of goodwill?
Economic Proportionate Parent
Unit Consolidation Company
Concept Concept Concept
a. $1,030,000 $770,000 $1,000,000
b. $1,000,000 $800,000 $800,000
c. $1,550,000 $770,000 $770,000
d. $800,000 $800,000 $1,030,000
e. $1,000,000 $250,000 $800,000
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Solution Summary
The solution explains the accounting for goodwill under Economic unit concept, Proportionate consolidation concept and Parent company concept
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