Question

Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2016. Miller paid $856,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value of $214,000 both before and after Miller’s acquisition.

On January 1, 2016, Taylor reported a book value of $752,000 (Common Stock = $376,000; Additional Paid-In Capital = $112,800; Retained Earnings = $263,200). Several of Taylor’s buildings that had a remaining life of 20 years were undervalued by a total of $100,300.

During the next three years, Taylor reports income and declares dividends as follows:

Year	Net Income			Dividends
2016	$	87,800		$	12,500
2017		112,500			18,800
2018		125,300			25,100

Determine the appropriate answers for each of the following questions:

a.     What amount of excess depreciation expense should be recognized in the consolidated financial statements for the initial years following this acquisition?

b.     If a consolidated balance sheet is prepared as of January 1, 2016, what amount of goodwill should be recognized?

a.		Amount of excess depreciation	$4,012selected answer INCORRECT
b.		Amount of goodwill	$174,160selected answer INCORRECT

Answer 1

a.

	Fair value
Depreciation	1,00,300
Remaining life	20
Excess depreciation	5,015

b.

	Particulars	Amount
a	Non controlling interest	2,14,000
b	Share of NCI	20%
c=a/b	Fair value of entity	10,70,000
	Less book value	7,52,000
	Goodwill	3,18,000