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The Utica Company pays $108,000 for a 90% interest of Rome Corp, and the fair value of the Romes net assets is $100,000.

Required.

A. Under entity theory, how much the Utica recognize the goodwill and non-controlling interest in the balance sheet at the time of acquisition? Explain why.

B. Under parent company theory, how much the Utica recognize the goodwill and non-controlling interest in the balance sheet at the time of acquisition? Explain why.

C. Explain how the current GAAP requires the acquiring company to recognize the goodwill (either entity or parent theory).


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