A. A subsidiary is an indivisible part of a business combination and should be included in its entirety regardless of the degree of ownership.
What is a basic premise of the acquisition method regarding accounting for a noncontrolling interest?
A. A subsidiary is an indivisible part of a business combination and should be included in its entirety regardless of the degree of ownership.
B. Consoli
D. $549,000.
Explanation:
At the date control is obtained, the parent consolidates subsidiary assets at fair value ($549,000 in this case) regardless of the parent's percentage ownership.
Mittelstaedt Inc., buys 60 percent of the outstanding stock of Sherry, Inc. Sherry owns a piece of land that cost $212,000 but had a fair value of $549,000 at the acquisition date. What value should be attributed to this land in a consolidated balance she
B. $400,000.
Explanation:
In consolidating the subsidiary's figures, all intra-entity balances must be eliminated in their entirety for external reporting purposes. Even though the subsidiary is less than fully owned, the parent nonetheless controls it.
Jordan, Inc., holds 75 percent of the outstanding stock of Paxson Corporation. Paxson currently owes Jordan $400,000 for inventory acquired over the past few months. In preparing consolidated financial statements, what amount of this debt should be elimin
A. $36,000.
Explanation:
An asset acquired in a business combination is initially valued at 100% acquisition-date fair value and subsequently amortized its useful life.
Patent FV at 1/1/2014 of $45,000
Less Amortization for 2 Years (10 Year Life) of ($9,0
On January 1, 2014, Brendan, Inc., reports net assets of $760,000 although equipment (with a four-year life) having a book value of $440,000 is worth $500,000 and an unrecorded patent is valued at $45,000. Hope Corporation pays $692,000 on that date for a
B. In the owners' equity section.
The noncontrolling interest represents an outside ownership in a subsidiary that is not attributable to the parent company. Where in the consolidated balance sheet is this outside ownership interest recognized?
A. In the liability section.
B. In the owner
D. $351,000.
Explanation:
Combined Revenues of $1,100,000
Less Combines Expenses of ($700,000)
Less Excess Acquisition-Date FV Amortization of ($15,000)
Equals Consolidated Net Income of $385,000
Less Noncontrolling interest of ($85,000 x 40%) = ($34,000)
On January 1, 2014, Chamberlain Corporation pays $388,000 for a 60 percent ownership in Neville. Annual excess fair-value amortization of $15,000 results from the acquisition. On December 31, 2015, Neville reports revenues of $400,000 and expenses of $300
D. $203,000.
Explanation:
Step 1
Consideration transferred by Pride of $540,000
Add Noncontrolling interest fair value of $60,000
Equals Star Acquisition-Date FV of $600,000
Less Star Book VAlue of $420,000
Equals Excess FV over BV of $180,000
Step 2
Exce
Note: The same company information is used for two questions.
On January 1, 2013, Pride Co. purchased 90 percent of the outstanding voting shares of Star Inc. for $540,000 cash. The acquisition-date fair value of the noncontrolling interest was $60,000. A
D. $250,000.
Explanation:
Under the equity method, consolidated RE = parent's RE.
Note: The same company information is used for two questions.
On January 1, 2013, Pride Co. purchased 90 percent of the outstanding voting shares of Star Inc. for $540,000 cash. The acquisition-date fair value of the noncontrolling interest was $60,000. A
D. Exclude 100 percent of the preacquisition revenues and 100 percent of the preacquisition expenses from their respective consolidated totals.
James Company acquired 85 percent of Mark-Right Company on April 1. On its December 31 consolidated income statement, how should James account for Mark-Right's revenues and expenses that occurred before April 1?
A. Exclude 15 percent of the preacquisition
C. $60,000.
Explanation:
Amie, Inc. Fair Value at July 1, 2015 is as follows.
30% Previously Owned Fair Value of (30,000 x $5) = $150,000
Add 60% New Shares Acquired of (60,000 shares x $6) = $360,000
Add 10% NCI Fair Value of (10,000 shares x $5) = $50,0
Amie, Inc., has 100,000 shares of $2 par value stock outstanding. Prairie Corporation acquired 30,000 of Amie's shares on January 1, 2012, for $120,000 when Amie's net assets had a total fair value of $350,000. On July 1, 2015, Prairie bought an additiona
C. Adjusted to fair value at the date of the second acquisition with a resulting gain or loss recorded.
A parent buys 32 percent of a subsidiary in one year and then buys an additional 40 percent in the next year. In a step acquisition of this type, the original 32 percent acquisition should be
A. Adjusted to its equity method balance at the date of the sec
C. $237,000.
Explanation:
Fair Value of 30% Noncontrolling Interest on April 1 of $165,000
Add 30% of Net Income for Remainder of Year of ($240,000 x 30%) = $72,000
Equals Noncontrolling Interest at December 31 of $237,000
On April 1, Pujols, Inc., exchanges $430,000 fair-value consideration 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 $165,000. Ramirez's i
C. Increase its additional paid-in capital by $16,000.
Explanation:
Proceeds of $80,000 less $64,000 (1/3 x $192,000) book value = $16,000
Control is maintained so excess proceeds go to APIC.
McKinley, Inc., owns 100 percent of Jackson Company's 45,000 voting shares. On June 30, McKinley's internal accounting records show a $192,000 equity method adjusted balance for its investment in Jackson. McKinley sells 15,000 of its Jackson shares on the
D. $486,000.
Explanation:
Combined revenues $1,300,000
Less Combined Expenses ($800,000)
Less Trademark Amortization ($6,000)
Less Patented Technology Amortization ($8,000)
Equals Consolidated Net Income of $486,000
Note: The same company information is used for three questions.
West Company acquired 60 percent of Solar Company for $300,000 when Solar's book value was $400,000. The newly comprised 40 percent noncontrolling interest had an assessed fair value of $200,
C. $34,400 and $240,800.
Explanation:
Subsidiary Net Income of ($100,000 - $14,000 excess Amortizations) = $86,000
x Noncontrolling Interest percentage of 40%
Equals Noncontrolling Interest Percentage of $34,400
Fair Value of noncontrolling interest at ac
Note: The same company information is used for three questions.
West Company acquired 60 percent of Solar Company for $300,000 when Solar's book value was $400,000. The newly comprised 40 percent noncontrolling interest had an assessed fair value of $200,
B. $508,000.
Explanation:
West Trademark Balance of $260,000
Add Solar Trademark Balance of $200,000
Add Acquisition-Date Fair Value Allocation of $60,000
Less Excess Fair Value amortization for two years of ($12,000)
Equals Consolidated Trademarks of $50
Note: The same company information is used for three questions.
West Company acquired 60 percent of Solar Company for $300,000 when Solar's book value was $400,000. The newly comprised 40 percent noncontrolling interest had an assessed fair value of $200,
A. $105,000.
Explanation:
Acquisition-date fair value of ($60,000/80%) = $75,000
Less Strand's Book Value of ($50,000)
Equals FV in excess of BV of $25,000
Excess Assigned to Inventory (60%) = $15,000
Excess Assigned to Goodwill (40%) = $10,000
Park Curre
Note: The same company information is used for five questions.
On January 1, Park Corporation and Strand Corporation had condensed balance sheets as follows:
Park:
Current Assets $70,000
Noncurrent Assets $90,000
Total Assets $160,000
Current Liabilities
D. $140,000.
Explanation:
Park noncurrent assets of $90,000
Add Strand noncurrent assets of $40,000
Add Excess FV to Goodwill of $10,000
Equals Consolidated Noncurrent Assets of $140,000
Note: The same company information is used for five questions.
On January 1, Park Corporation and Strand Corporation had condensed balance sheets as follows:
Park:
Current Assets $70,000
Noncurrent Assets $90,000
Total Assets $160,000
Current Liabilities
C. $46,000.
Explanation:
Add the two book values and include 10% (the $6,000 current portion) of the loan taken out by Park to acquire Strand.
Note: The same company information is used for five questions.
On January 1, Park Corporation and Strand Corporation had condensed balance sheets as follows:
Park:
Current Assets $70,000
Noncurrent Assets $90,000
Total Assets $160,000
Current Liabilities
B. $104,000.
Explanation:
Add the two book values and include 90% (the $54,000 noncurrent portion) of the loan taken out by Park to acquire Strand.
Note: The same company information is used for five questions.
On January 1, Park Corporation and Strand Corporation had condensed balance sheets as follows:
Park:
Current Assets $70,000
Noncurrent Assets $90,000
Total Assets $160,000
Current Liabilities
B. $95,000.
Park Stockholders Equity of $80,000
Add NCI at Fair Value of (20% x $75,000) = $15,000
Equals Total Stockholders' Equity of $95,000
Note: The same company information is used for five questions.
On January 1, Park Corporation and Strand Corporation had condensed balance sheets as follows:
Park:
Current Assets $70,000
Noncurrent Assets $90,000
Total Assets $160,000
Current Liabilities