Problem 3 On January 1, Year 1, Hulk Company acquires 60% of…
Problem 3 On January 1, Year 1, Hulk Company acquires 60% of Griffin Company for $700,000 cash. The remaining 40% of Griffin’s shares continued to trade at a fair value of $310,000. On the acquisition date, Griffin reported Common Stock of $350,000 and Retained Earnings of $280,000. A Patent on Griffin’s books was undervalued by $100,000 (5-year remaining useful life). Goodwill of $280,000 was recognized and correctly allocated to the Controlling and Noncontrolling Interests. Griffin Company earns income and pays cash dividends as follows: Year Net Income Cash Dividends Year 1 $ 75,000 $39,000 Year 2 96,000 44,000 Year 3 110,000 60,000 Use the information above to answer the next two questions.