Question

Polaris Incorporated purchased 80% of The Solar Company on January 2, 2011, when Solar's book value was $800,000. Polaris paid $700,000 for their acquisition, and the fair value of noncontrolling interest was $175,000. At the date of acquisition, the fair value and book value of Solar's identifiable assets and liabilities were equal. At the end of the year, the separate companies reported the following balances:

Polaris Solar

Current assets 5,700,000 1,250,000

Plant & equipment 15,200,000 3,400,000

Investment in Solar 780,000 0

Goodwill 0 0

Current liabilities 3,600,000 950,000

Long-term debt 11,680,000 2,800,000

Stockholder's Equity 6,400,000 900,000

Requirement 1: Calculate consolidated balances for each of the accounts as of December 31, 2011.

Requirement 2: Assuming that Solar has paid no dividends during the year, what is the ending balance of the noncontrolling interest in the subsidiary?

Answer

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