Question

McGuire Company acquired 90 percent of Hogan Company on January 1, 2019, for $234,000 cash. This amount is reflective of Hogan’s total acquisition-date 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:

	Book Value				Fair Value
Buildings (10-year life)	$	10,000			$	8,000
Equipment (4-year life)		14,000				18,000
Land		5,000				12,000

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, 2019, what adjustment is necessary for Hogan's Patent account?

Multiple Choice

• $7,000.

• $6,300.

• $11,000.

• $9,900.

Answer 1

	Amount $
Purchase Consideration	234,000
Add: Non Controlling Interest	24,900
( 240,000 + 9,000 ) x 10%
Less: Book value of Net Assets	- 240,000
=160000+80000
Less: Net Difference in Fair value & Book value	- 9,000
=(8000+18000+12000)-(10000+14000+5000)
Amount attributable to Unamortized patent	9,900
Correct answer is option 4 .