I would like to know why we don't prorate 9 / 12? On April 1, Pujols,...

I would like to know why we don't prorate 9 / 12?

On April 1, Pujols, Inc., exchanges $524,500 for 70 percent of the outstanding stock of Ramirez Corporation. The remaining 30 percent of the outstanding shares continued to trade at a collective fair value of $204,400. Ramirez’s identifiable assets and liabilities each had book values that equaled their fair values on April 1 for a net total of $625,000. During the remainder of the year, Ramirez generates revenues of $697,000 and expenses of $369,000 and declared no dividends. On a December 31 consolidated balance sheet, what amount should be reported as noncontrolling interest?

Ans. 302,800

Homework Answers

Answer #1
Non-Controlling Interest
Amount in $
Non-Controlling Interest fair value at acquisition       204,400
Add: Post acqusition share of profit of Ramirez          98,400
( 697,000 - 369,000 ) x 30%
Non-Controlling Interest on December 31      302,800

*We will not do prorate 9/12 because the revenue & expense are given for 9 months only (April to December) after the acquisition date.

Hence net profit of $ 598,000 ( 697,000 - 369,000 ) is post acquisition profit & 30% of which will be shared with NCI amounting to $ 98,400 ( 598,000 x 30% ).

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