Question

14)

On 1/1/15, Pom Company Acquired 90% of the voting common stock of Star Co. for $91,700,000 in cash, The FV of the NCI in Star at date of acquisition was 6,300,000. Star’s net book value is $14,000,000 at date of acquisition. Star’s assets and liabilities were reported on its books at values approximating FV, except its P&E (10 yr. life, S-L) was overvalued by $25,000,000 and Star had previously unreported intangible assets with a FV of $40,000,000 (5 yr. life, S-L).

At date of acquisition, consolidating eliminating entry (R) credits NCI in Star in the amount of

a) $4,900,000

b) $3,400,000

c) $1,500,000

d) $5,000,000

Answer 1

14	Acquisition cost		$91,700,000
	Fair value of NCI		$6,300,000
	Total Fair Value		$98,000,000
	Book Value of Star	$14,000,000
	Fair value adjustment
	P&E	($25,000,000)
	Intangible asset	$40,000,000	$29,000,000
	Goodwill		$69,000,000
	Allocation of Goodwill
	Total Goodwill	$69,000,000
	Pom's share of goodwill
	($91700000-90% ($29000000))	$65,600,000
	NCI share of goodwill	$3,400,000
	Eliminating Entry R
	Intangible Assets	$40,000,000
	Goodwill	$69,000,000
	P&E		$25,000,000
	Investment in Star		$79,100,000
	NCI in Star		$4,900,000
	Investment in star = 90% (40000000-25000000)[phone]
	NCI in star = 10% (40000000-25000000)+3400000
a	$4,900,000