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Question - The Krause Corporation acquired 80 percent of the 100,000 outstanding voting shares of Leahy, Inc., for $6.80 per share on January 1, 2012. The remaining 20 percent of Leahy's shares also traded actively at $6.80 per share before and after Krause's acquisition. An appraisal made on that date determined that all book values appropriately reflected the fair values of Leahy's underlying accounts except that a building with a 5-year life was undervalued by $84,000 and a fully amortized trademark with an estimated 10-year remaining life had a $81,000 fair value. At the acquisition date, Leahy reported common stock of $100,000 and a retained earnings balance of $254,000.
Following are the separate financial statements for the year ending December 31, 2013:
Krause Corporation
Leahy, Inc.
Sales
$(751,000)
$(409,250)
Cost of goods sold
249,000
177,000
Operating expenses
287,000
128,250
Dividend income
(16,000
0
Net income
$(231,000)
$(104,000)
Retained earnings, 1/1/13
$(753,000)
$(324,000
Net income (above)
(231,000
(104,000)
Dividends paid
80,000
20,000
Retained earnings, 12/31/13
$(904,000)
$(408,000)
Current assets
$147,000
$186,000
Investment in Leahy, Inc.
544,000
Buildings and equipment (net)
900,000
405,000
Trademarks
147,000
145,000
Total assets
$1,738,000
$736,000
Liabilities
$(514,000)
$(228,000)
Common stock
(320,000)
(100,000)
Retained earnings, 12/31/13 (above)
(904,000)
(408,000)
Total liabilities and equities
$(1,738,000)
$(736,000)
Note: Parentheses indicate a credit balance.
If instead the noncontrolling interest shares of Leahy had traded for $5.19 surrounding Krause's acquisition date, what is the impact on goodwill?
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