Question: On December 31, 2008 Firm P reported assets of $800 million and liabilities of $350 million. On January 1, 2009 it acquires Firm S for $350 million cash. The book value of Firm S’s assets is $260 million and the fair values of its assets are $320 million (the difference in value is solely due to property, plant, and equipment with a remaining life of 10 years); the book value and fair value of Firm S’s liabilities are $120 million and $150 million, respectively. Firm P reported income of $45 million for 2009 before considering the effects of consolidation. Firm S reported income of $16 million for 2009.
[A] Calculate the total goodwill reported in P’s consolidated balance sheet at 1/1/09.
[B] Calculate the total assets, liabilities, and stockholders' equity reported in P’s consolidated balance sheet at 1/1/09?
[C] Determine the total income reported in P’s consolidated income statement for 2009.
[D] If firm P acquires 70% of Firm S for $280 million, how much non-controlling (minority) interest would it report in a consolidated balance sheet prepared on 1/1/09 and how much income would be attributed to the non-controlling (minority) interest for 2009?
[E] Describe why a firm may purchase slightly less than 50% of another firm.