Question

On 1/1/2017 Starr Co. acquired 60% of the common stock of Best Inc. for $1,200,000. The...

On 1/1/2017 Starr Co. acquired 60% of the common stock of Best Inc. for $1,200,000. The fair value of Best's net assets at that time was $1,800,000, and these net assets had a book value of $1,500,000. The non-controlling interest shares of Best Inc. are not actively traded and the best basis to determine fair value of the non controlling interest would be Starr Co.’s purchase. For the year 2017, Best Inc. earned $250,000 net income and paid dividends of $100,000.

What is the dollar amount of non-controlling interest that should appear in a consolidated balance sheet prepared at the date of acquisition 1/1/2017? SHOW WORK TO SUPPORT YOUR ANSWER.

What is the total amount of goodwill, if any, recognized at the date of acquisition that would be reported in consolidated financial statements? SHOW WORK IN SUPPORT OF YOUR ANSWER.

What is the non controlling interests share of Best Inc. income for 2017? SHOW WORK IN SUPPORT OF YOUR ANSWER.

What is the balance in the Non-Controlling Interest account in Consolidation at 12/31/2017?

SHOW ALL WORK IN SUPPORT OF YOUR ANSWER.

Homework Answers

Answer #1

Non Controlling interest (NCI) on the date of acquisition 1/1/17.

Particulars $
Book Value of Net Assets $15,00,000
percentage of NCI 40%
Book Value of Net Assets for NCI $6,00,000

Calculation of goodwill to be recognised.

Particulars $
Book Value of Net Assets $15,00,000
percentage of Controlling Interest 60%
Book Value of Net Assets $9,00,000
Purchase consideration paid $12,00,000
Goodwill $3,00,000

Non Controlling interest on the date of consolidation 31/12/17

Particulars $
Book Value of Net Assets for NCI $6,00,000
Share on net income for the year $1,00,000 ($250,000*40%)
Dividend paid -$40,000 (-$100,000*40%)
NCI on the date of consolidation $6,60,000
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1)Presents Inc. acquired all of the outstanding common stock of Santa Co. on January 1, 2017,...
1)Presents Inc. acquired all of the outstanding common stock of Santa Co. on January 1, 2017, for $257,000. Annual amortization of $19,000 resulted from this acquisition. Presents reported net income of $70,000 in 2017 and $50,000 in 2018 and paid $22,000 in dividends each year. Santa reported net income of $40,000 in 2017 and $47,000 in 2018 and paid $10,000 in dividends each year. What is the amount of consolidated net income for the year 2018? A. $0. B. $70,000....
Louise Corp. owned all of the voting common stock of Thelma Co. On January 1, 2017,...
Louise Corp. owned all of the voting common stock of Thelma Co. On January 1, 2017, Thelma sold a parcel of land to Louise. The land had a book value of $32,000 and was sold to Louise for $45,000. What journal entry, if any, should be recorded on the consolidation work sheet for the consolidation the operations of Louise Corp and Thelma Corp as a result of this transaction? SHOW ALL WORK IN SUPPORT OF YOUR ANSWER Chaffee Co. owned...
On January 1, 2020, Harrison, Inc., acquired 90 percent of Starr Company in exchange for $1,125,000...
On January 1, 2020, Harrison, Inc., acquired 90 percent of Starr Company in exchange for $1,125,000 fair-value consideration. The total fair value of Starr Company was assessed at $1,200,000. Harrison computed annual excess fair-value amortization of $8,000 based on the difference between Starr’s total fair value and its underlying book value. The subsidiary reported net income of $70,000 in 2020 and $90,000 in 2021 with dividend declarations of $30,000 each year. Apart from its investment in Starr, Harrison had net...
On August 1, Year 1, A Co. acquired 70 percent of the common shares of B...
On August 1, Year 1, A Co. acquired 70 percent of the common shares of B co. for $700,000 in cash. On that date, the fair value of A’s identifiable net assets was $ 2,000,000 and the book value of its shareholders’ equity was 8,000,000. On that date, the fair value of B’s identifiable net assets was $ 6,000,000 and the book value of its shareholders’ equity was 500,000. For both companies, the fair value of all liabilities is equal...
1)Presents Inc. acquired all of the outstanding common stock of Santa Co. on January 1, 2017,...
1)Presents Inc. acquired all of the outstanding common stock of Santa Co. on January 1, 2017, for $257,000. Annual amortization of $19,000 resulted from this acquisition. Presents reported net income of $70,000 in 2017 and $50,000 in 2018 and paid $22,000 in dividends each year. Santa reported net income of $40,000 in 2017 and $47,000 in 2018 and paid $10,000 in dividends each year. On the consolidated financial statements for 2017, a)what amount should have been shown for Equity in...
1. Dodd Co. acquired 75% of the common stock of Wallace Corp. for $1,800,000. The fair...
1. Dodd Co. acquired 75% of the common stock of Wallace Corp. for $1,800,000. The fair value of Wallace’s net assets was $2,100,000, and the book value was $1,900,000. The noncontrolling interest shares of Wallace Corp. are not actively traded. What is the total amount of goodwill recognized at the date of acquisition? a. $0 b. $300,000 c. $200,000 d. $700,000 e. $100,000 2. When Valley Co. acquired 80% of the common stock of Coleman Corp., Coleman owned land with...
On August 1, Year 5, A Company acquired 70 Percent of the common shares of C...
On August 1, Year 5, A Company acquired 70 Percent of the common shares of C Company for $700,000. On that date, the fair value of C’s identifiable net assets was $600,000 and the book value of its shareholders’ equity was $500,000 Assume that fair value enterprise method will be used for valuation of subsidiary. What amount of non-controlling interest should be reported on the balance sheet on the date of acquisition? $0 $150,000 $180,000 $300,000 Assume that Identifiable net...
On August 1, Year 5, A Company acquired 70 Percent of the common shares of C...
On August 1, Year 5, A Company acquired 70 Percent of the common shares of C Company for $700,000. On that date, the fair value of C’s identifiable net assets was $600,000 and the book value of its shareholders’ equity was $500,000 Assume that fair value enterprise method will be used for valuation of subsidiary. What amount of non-controlling interest should be reported on the balance sheet on the date of acquisition? $0 $150,000 $180,000 $300,000 Assume that Identifiable net...
PAM Co. acquired all of the common stock of Sista Co. on January 1, 2017. As...
PAM Co. acquired all of the common stock of Sista Co. on January 1, 2017. As of that date, Sista had the following trial balance: Debit Credit Accounts payable $ 60,000 Accounts receivable $ 50,000 Additional paid-in capital 60,000 Buildings (net) (20-year life) 140,000 Cash and short-term investments 70,000 Common stock 300,000 Equipment (net) (8-year life) 240,000 Intangible assets (indefinite life) 110,000 Land 90,000 Long-term liabilities (mature 12/31/19) 180,000 Retained earnings, 1/1/17 120,000 Supplies 20,000 Totals $ 720,000 $ 720,000...
On 31 December 20x8, M Ltd paid $300,000 to acquire 80% interest of N Ltd when...
On 31 December 20x8, M Ltd paid $300,000 to acquire 80% interest of N Ltd when the fair value of N Ltd’s net assets was represented by share capital of $100,000 and retained profit of $100,000, except for N Ltd’s freehold land which was carried at $100,000 but deemed to have a fair value of $150,000. On this date, N Ltd’s share capital comprised 100,000 ordinary shares with a fair value of $2.60 per share. Assuming the group policy of...