On December 30, year 2, Perch Corporation acquired a 70% interest in Salmon Corporation by purchasing 70% of the outstanding voting (common) shares of Salmon Corporation for cash. Perch’s cost of the Investment in Salmon was $294,000. To complete the transaction, Perch incurred legal fees of $12,000.
On December 30, year 2, Perch assessed the book values of Salmon were equal to fair values with the exception of the following accounts:
Account Book Value Fair Value
Plant and equipment (at net) $270,000 $310,000
Inventory $102,000 $112,000
Long Term Debt $108,000 $103,000
Condensed statements of financial position for Perch Corporation and Salmon Corporation on December 31, Year 2 (the day after the purchase) are shown below:
PERCH Corporation SALMON Corporation
Cash $ 22,000 $ 60,000
Accounts Receivable 80,000 48,000
Inventory 120,000 102,000
Investment in Salmon 294,000 ----------
Plant and equipment (at net) 400,000 270,000
Total Assets $ 916,000 $ 480,000
Current Liabilities $216,000 $ 72,000
Long Term Debt 240,000 108,000
Common Shares 260,000 120,000
Retained Earnings 200,000 180,000

Total Liabilities and Shareholders’ Equity $916,000 $ 480,000
Perch prepares consolidated financial statements under the fair value enterprise (FVE) theory (also known as "entity" theory).
Required:
1. Prepare the entry on Perch’s books to record its investment in Salmon on December 30, year 2.
2. Calculate the acquisition differential, goodwill and non-controlling interest (NCI) at acquisition date using the FVE (entity) theory.



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