Question

On January 1, Coldwater Company has a net book value of $1,625,000 as follows: 1,850 shares...

On January 1, Coldwater Company has a net book value of $1,625,000 as follows:

1,850 shares of preferred stock; par value $100 per share; cumulative, nonparticipating, nonvoting; call value $108 per share $ 185,000
22,500 shares of common stock; par value $40 per share 900,000
Retained earnings 540,000
Total $ 1,625,000

Westmont Company acquires all outstanding preferred shares for $198,000 and 60 percent of the common stock for $918,660. The acquisition-date fair value of the noncontrolling interest in Coldwater’s common stock was $612,440. Westmont believed that one of Coldwater’s buildings, with a 12-year remaining life, was undervalued by $54,600 on the company’s financial records.

What amount of consolidated goodwill would be recognized from this acquisition?

  • $49,500.

  • $45,900.

  • $44,700.

  • $43,500.

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Answer #1

ANSWER:

CORRECT OPTION IS (A) = $49,500.00

Calculation of amount of consolidated goodwill would be recognized from this acquisition

Consideration transferred for preferred stock = 1,98,000 .00

Consideration transferred for common stock = 918,660.00

Non controlling interest fair value for common = 612,440.00

Acquisition-date fair value = 1,98,000 .00 + 918,660.00 +612,440.00

= 1,729,100.00

Acquisition-date book value = (1,625,000.00)

Excess fair over book value = 1,729,100.00 - 1,625,000.00

= 104,100.00

to building = 54,600 .00

to goodwill = 104,100.00 -  54,600 .00 = $49,500.00


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