Question

The following information pertains to the following 2 Questions. On January 1, 2021, Gooch Company acquires...

The following information pertains to the following 2 Questions.

On January 1, 2021, Gooch Company acquires 80% of the outstanding common stock of House Inc., for a purchase price of $12,400,000. It was determined that the fair value of the noncontrolling interest in the subsidiary is $3,100,000. The book value of the House’s stockholders’ equity on the date of acquisition is $10,000,000 and its fair value of net assets is $11,000,000. The acquisition-date acquisition accounting premium (AAP) is allocated $600,000 to equipment with a remaining useful life of 10 years, and $250,000 to a patent with a remaining useful life of 5 years.

20.       The [A] consolidating journal entry (on Gooch’s books) to recognize the acquisition date AAP and allocate the ownership interest in those assets to the parent and noncontrolling interests includes:

a.   Equity investment, credit, $5,350,000

b.   Noncontrolling interest, credit, $3,100,000

c.   House’s retained earnings, debit, $2,00,000

d.   Noncontrolling interest, credit, $1,070,000

21.        What is the acquisition accounting premium (AAP)?

a. $5,500,000

b. $4,650,000

c. $2,400,000

d. $4,400,000

Business   Accounting   
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Homework Answers

Answer #1

Part 20

Option D

d.   Noncontrolling interest, credit, $1,070,000

NCI’s portion of goodwill = 3100000 – (20% * 11000000) = 900000

NCI’s portion of AAP allocated to identifiable assets = 20% * (600000+250000) = 170000

Total AAP allocated to NCI = 900000+170000 = $1070000

Part 21

Option A

a. $5,500,000

Total AAP = purchase price+ noncontrolling interest in the subsidiary- book value of the Subsidiary’s stockholders’ equity = 12400000+3100000-10000000 = $5500000

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