Peak Entertainment acquires 60 percent of its subsidiary Saddlestone Inc. on Jan
Peak Entertainment acquires 60 percent of its subsidiary Saddlestone Inc. on January 1, 2016. In preparing to consolidate Peak and Saddlestone at December 31, 2016, we assemble the following information:
•Value of stock given up to acquire Saddlestone: $10,000,000.
•Direct merger costs: $250,000.
•Saddlestone’s stockholders’ equity at acquisition: $7,200,000.
•Fair value of earnings contingency agreement to be paid in cash: $300,000.
•Fair value of previously unrecorded identifiable intangibles (5-year life): $2,000,000.
•Goodwill and identifiable intangibles are not impaired in 2016.
•Fair value of the 40 percent noncontrolling interest at acquisition: $6,500,000.
•Saddlestone’s net income in 2016: $3,000,000.
•Saddlestone’s dividends declared and paid in 2016: $1,000,000.
•Peak uses the complete equity method to report the investment on its own books.
(a) Calculate total goodwill and its allocation to the controlling and noncontrolling interests.
I have computed total good will to be 7,600,000 but I cannot figure out the total good will allocated to non controlling interest or to Peaks. I assumed it would be 60% and 40% but its not
ParticularsDirect merger costsadd: price paid to acquiretotal purchase considerations’s stockholders equitytotal goodwillp’s goodwillgoodwill to non controlling interest amoun t250000…