Question

On August 1, Year 5, A Company acquired 70 Percent of the common shares of C...

On August 1, Year 5, A Company acquired 70 Percent of the common shares of C Company for $700,000. On that date, the fair value of C’s identifiable net assets was $600,000 and the book value of its shareholders’ equity was $500,000

  1. Assume that fair value enterprise method will be used for valuation of subsidiary. What amount of non-controlling interest should be reported on the balance sheet on the date of acquisition?
  1. $0
  2. $150,000
  3. $180,000
  4. $300,000
  1. Assume that Identifiable net asset method will be used for valuation of subsidiary. What amount of no controlling interest should be reported on the consolidated balance sheet on the date of acquisition?
  1. $0
  2. $115,000
  3. $180,000
  4. $300,000
  1. On January 1, Year 5 ,PEB acquired 100 Percent of the common shares of SEB for $ 600,000.On that date , the fair value of SEB’s identifiable net assets was $700,000 . Which of the following is the appropriate treatment of $100,000 acquisition differential?
  1. It should be recognized as a gain on purchase.
  2. It should be allocated to identifiable non-monetary assets.
  3. It should be allocated to non-current assets with any remaining balance reported as an extraordinary item.
  4. A deferred credit should be set up and amortized over a maximum of five years.
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

1) d. $ 3,00,000

Non-controlling interest = ( Purchase consideration / Controlling interest % ) × Non-controlling interest %

Controlling interest % = 70%

Non-controlling interest % = 100% - 70% = 30%

Non-controlling interest = $ 7,00,000 / 70% × 30%

= $ 3,00,000

2) c. $ 1,80,000

Non-controlling interest = Fair value of Identifiable net assets × Non-controlling interest %

= $ 6,00,000 × 30%

= $ 1,80,000

3) a. It should be recognized as a gain on purchase.

In case of 100% share acquisition, where purchase consideration ( $ 6,00,000 ) is less than fair value of Identifiable net assets ($ 7,00,000), it shall be treated as gain on purchase.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On August 1, Year 5, A Company acquired 70 Percent of the common shares of C...
On August 1, Year 5, A Company acquired 70 Percent of the common shares of C Company for $700,000. On that date, the fair value of C’s identifiable net assets was $600,000 and the book value of its shareholders’ equity was $500,000 Assume that fair value enterprise method will be used for valuation of subsidiary. What amount of non-controlling interest should be reported on the balance sheet on the date of acquisition? $0 $150,000 $180,000 $300,000 Assume that Identifiable net...
On August 1, Year 1, A Co. acquired 70 percent of the common shares of B...
On August 1, Year 1, A Co. acquired 70 percent of the common shares of B co. for $700,000 in cash. On that date, the fair value of A’s identifiable net assets was $ 2,000,000 and the book value of its shareholders’ equity was 8,000,000. On that date, the fair value of B’s identifiable net assets was $ 6,000,000 and the book value of its shareholders’ equity was 500,000. For both companies, the fair value of all liabilities is equal...
Pickup Company acquired 100 percent of the voting common shares of Sedan Corporation by issuing bonds...
Pickup Company acquired 100 percent of the voting common shares of Sedan Corporation by issuing bonds with a par value and fair value of $200,000. Immediately prior to the acquisition, Pickup reported total assets of $600,000, liabilities of $370,000, and stockholders’ equity of $230,000. At that date, Sedan reported total assets of $500,000, liabilities of $300,000, and stockholders’ equity of $200,000. Included in Sedan’s liabilities was an account payable to Pickup in the amount of $50,000, which Pickup included in...
Princeton Company acquired 75 percent of the common stock of Sheffield Corporation on December 31, 2011....
Princeton Company acquired 75 percent of the common stock of Sheffield Corporation on December 31, 2011. On the date of acquisition, Princeton held land with a book value of $150,000 and a fair value of $300,000; Sheffield held land with a book value of $100,000 and fair value of $500,000. What amount would land be reported in the consolidated balance sheet prepared immediately after the combination? a.$650,000 b.$500,000 c.$550,000 d.$375,000 On January 1, 2011, Primer Corporation acquired 80 percent of...
On 1/1/2017 Starr Co. acquired 60% of the common stock of Best Inc. for $1,200,000. The...
On 1/1/2017 Starr Co. acquired 60% of the common stock of Best Inc. for $1,200,000. The fair value of Best's net assets at that time was $1,800,000, and these net assets had a book value of $1,500,000. The non-controlling interest shares of Best Inc. are not actively traded and the best basis to determine fair value of the non controlling interest would be Starr Co.’s purchase. For the year 2017, Best Inc. earned $250,000 net income and paid dividends of...
On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company...
On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,649,200 in cash. The price paid was proportionate to Sellinger’s total fair value, although at the acquisition date, Sellinger had a total book value of $2,100,000. All assets acquired and liabilities assumed had fair values equal to book values except for a patent (six-year remaining life) that was undervalued on Sellinger’s accounting records by $246,000. On January 1, 2018, Palka acquired an additional...
On July 1, 2018, Truman Company acquired a 70 percent interest in Atlanta Company in exchange...
On July 1, 2018, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $788,900 in cash and equity securities. The remaining 30 percent of Atlanta’s shares traded closely near an average price that totaled $338,100 both before and after Truman’s acquisition. In reviewing its acquisition, Truman assigned a $129,500 fair value to a patent recently developed by Atlanta, even though it was not recorded within the financial records of the subsidiary. This patent is...
On January 1, 2016, Monica Company acquired 70 percent of Young Company’s outstanding common stock for...
On January 1, 2016, Monica Company acquired 70 percent of Young Company’s outstanding common stock for $665,000. The fair value of the noncontrolling interest at the acquisition date was $285,000. Young reported stockholders’ equity accounts on that date as follows: Common stock—$10 par value $ 300,000 Additional paid-in capital 90,000 Retained earnings 410,000 In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $50,000. Any remaining...
A subsidiary, Boston Corp., is wholely acquired by Massachusetts Co. on January 1, 2015 for $10...
A subsidiary, Boston Corp., is wholely acquired by Massachusetts Co. on January 1, 2015 for $10 million. The subsidiary’s book value at the date of acquisition was $2 million. Following is the information for the subsidiary’s identifiable net assets at the date of acquisition: Fair Value Excess Inventories is overvalued (i.e., book value > fair value): $ 200,000 FIFO Identifiable intangibles is undervalued: $ 5,000,000 Straight-line, 5 years Long-term debt is undervalued: $ 300,000 Straight-line, 2 years Inventories (based on...
Holding Company owns 60 percent of the outstanding shares of Subsidiary Company. During the current year,...
Holding Company owns 60 percent of the outstanding shares of Subsidiary Company. During the current year, Holding Company sold inventory costing $90,000 to Subsidiary Company for $100,000. Subsidiary Company has already transferred cash in full payment. Subsidiary Company still holds all of this inventory on the last day of the year. At the balance sheet date, Holding Company has total current assets of $700,000 whereas Subsidiary Company has total current assets of $400,000. Assume that there were no allocations established...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT