[Snarky900]

On 1/1/2010, Jannison Inc. acquired 90% of Techron Co. by paying $477,000 cash. There is no active trading market for Techron stock. Techron Co. reported a Common Stock account balance of $140,000 and Retained Earnings of $280,000 at that date. The fair value of Techron Co. was appraised at $530,000. The total annual amortizations was $11,000 as a result of this transaction. The subsidiary earned $98,000 in 2010 and $126,000 in 2011 with dividend payments of $42,000 each year. Without regard for this investment, Jannison had income of $308,000 in 2010 and $364,000 in 2011. Use the economic unit concept to account forthis acquisition.Prepare a proper presentation ofconsolidated net income for2010.

[rehmanvohra]

Cash paid for stock 477,000
Stockholders' equity
(140,000+280,000)*.90 (378,000)
Goodwill 99,000

Year 2010 2011
Income from Techron 98.000 126,000
Share of Jannison (90%) 88,200 113,400
Less dividends received (90%) ( 37,800) (37,800)
Increase in parent's retained earnings 40,400 75,600
Parent's net income 308,000 364,000
Amortization 11,000 11,000
Consolidated Net Income 337,400 428,600