Question

McGuire Company acquired 90 percent of Hogan Company on January 1, 2019, for $234,000 cash. This...

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.

Homework Answers

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 .
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