Part A (questions 1 through 25)
The following information and table pertain to questions 1 through 25.
On January 1, 2010, Apple Company acquired 75% of the outstanding common stock of Orange Company for $600,000 in cash. On the date of the acquisition, the fair value of the 25% noncontrolling interest in the Orange Company was $200,000. The book value of Orange Company’s net assets on January 1, 2010, was $500,000 and consisted of common stock of $150,000 and retained earnings of $350,000.
Some of Orange Company assets were internally developed and were not reported on its books or had fair value that differed from it carrying value on the date of the acquisition as follows:
Any remaining excess acquisition-date fair value was assigned to goodwill. Since acquisition, Apple has not had any goodwill impairments.
Intra-entity inventory sales between the two companies have been made as follows:
Presented below are the financial statements for these two companies as of December 31, 2011, prepared from their separately maintained accounting systems. Credit balances are indicated by parentheses.
What is the amount of goodwill, if any, that Apple Company should recognize on its consolidated financial statements?
|Computation of Goodwill||Total||Apple (75%)||NCI (25%)|
|Consideration paid to acquire 75% stock||$600,000|
|Fair value of 25% noncontrolling interest||$200,000|
|Total fair value||$800,000||$600,000||$200,000|
|Less: Book Value|
|Total Book value||$500,000||$375,000||$125,000|
|Excess of fair value over book value||$300,000||$225,000||$75,000|
|Excess allocated to:|
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