Investor Accounting and Reporting
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Plum Corporation paid $700,000 for a 40% interest in Satin Company on January 1, 2011 when Plum's stockholders' equity was as follows:
10% cumulative preferred stock, $100 par $ 500,000
Common stock, $10 par value 300,000
Other paid-in capital 400,000
Retained earnings 800,000
Total stockholders' equity $2,000,000
On this date, the book values of Plum's assets and liabilities equaled their fair values and there were no dividends in arrears.
Required: Calculate the amount recorded in the Investment in Satin Company and the amount of implied Goodwill in this transaction.
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Solution Summary
The expert calculates the amount recorded in the Investment and the amount of implied Goodwill in this transaction.
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Cost of Satin investment
(amount recorded in the
Investment account): $700,000 ...
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