Question

McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This...

McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following:

Building: Book Value=$10,000 Fair Value=$8,000

Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.

In consolidation at January 1, 2014, what adjustment is necessary for Hogan's Buildings account?

Homework Answers

Answer #1
January 1, 2014
Particulars $ $
Money paid for 90% share of Hogan Company 234000
Less:
Common Stock ( 90% share) 129600
Retained earnings ( 90% share) 64800 194400
Excess Contribution to be unamortized over 5 Year 39600
Per year amortized value 7920
Fair Value of building 8000
Proporsnate amortized value            326
(7,920/194,400 x 8,000)
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