Consolidation under equity method

CFA Level II
#1

1)Book value of the investee = 90,000

2)Book value of this investment recorded on investor’s balance sheet = 61,100

30% consolidation under equity method.

Why wouldn’t we use statement 2 when calculating goodwill vs. statement 1?

Thanks,

#2

Consolidation and the equity method are two different (and incompatible) things.

What are you (or, if a quote, what is the author) trying to say here?

#3

Pro rata share in the investee company by the investor is 30%

#4

The question makes no sense. What is statement 2? There seems to be missing information?

#5

To calculate goodwill you would compare the price you paid to the value that you received; if your price exceeds the book value of what you receive and any additional value (above book value) that you can ascribe to specific assets, then you have goodwill. The two statements aren’t sufficient for us to determine whether there’s any goodwill.

#6

consolidation and equity method in the same sentence??

#7

We got past that already.

Read the thread.