excess consideration transferred over fair value

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2010. Demers reported common stock of $300,000 and retained earnings of $210,000 on…

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2010. Demers reported

common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued

by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any

excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based

on an annual review, goodwill has not been impaired.

Demers earns income and pays dividends as follows:

Assume the equity method is applied.

Compute Pell’s investment in Demers at December 31, 2010.
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