Questions based on consolidated balance sheet.
On December 31, 2008 Company P reported assets of $800 million and liabilities of $350 million. On January 1, 2009 it acquires Company S for $350 million cash. The book value of Company S's assets are $260 million and the fair value 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 Company S's liabilities are $120 million and $150 million, respectively. Company P reported income of $45 million for 2009 before considering the effects of consolidation. Company S reported income of $16 million for 2009.
a. Compute the total goodwill reported in P's consolidated balance sheet at 1/1/09.
b. Compute the total assets, liabilities, and stockholders' equity reported in P's consolidated balance sheet at 1/1/09?
c. Compute the total income reported in P's consolidated income statement for 2009.
d. If company P acquires 70% of Company S for $280 million, how much noncontrolling (minority) interest would it report in a consolidated balance sheet prepared on 1/1/09 and how much income would be attributed to the noncontrolling (minority) interest for 2009?
e. Explain why a company may purchase slightly less than 50% of another company.