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    Corporate Consolidation Transfers

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    On January 1, 2009, Parker bought a 55% interest in Smith, Inc. Parker paid for the transaction with $3 million cash and 500,000 shares of Parker common stock (par value $1.00 per share). At the time of the acquisition, Smith's book value was $16,970,000. The remaining 45 percent of Smith's shares traded closely near an average price that totaled $8,550,000.
    On January 1, Parker's stock had a market value of $14.90 per share and there was no control premium in this transaction. Any consideration transferred over book value is assigned to goodwill. Smith had the following balances on January 1, 2009.
    Book Value Fair Value
    Land 1,700,000 2,550,000
    Buildings (7-year remaining life) 2,700,000 3,400,000
    Equipment (5-year remaining life) 3,700,000 3,300,000

    For internal reporting purposes, Parker employed the equity method to account for this investment. (Financial statement data on page 2)
    1. Prepare a schedule to determine goodwill and the amortization and allocation amounts.

    2. Prepare a consolidation worksheet for this business combination. Assume goodwill has been reviewed and there is no goodwill impairment.

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    Solution Summary

    Corporate consolidation transfers are examined.