On January 1, 2015, Pomegranate Company acquired 80% of the voting stock of Starfruit Company for $70,000,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $9,400,000. Starfruit's book value was $11,600,000 at the date of acquisition. Starfruit's assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $13,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $16,000,000 and 5-year life, straight-line, which were capitalized following GAAP.
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At the date of acquisition, consolidation eliminating entry (R) credits the noncontrolling interest in Starfruit Company in the amount of ...
$7,080,000
On January 1, 2015, Pomegranate Company acquired 80% of the voting stock of Starfruit Company for $70,000,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $9,400,000. Starfruit's book value was $11,600,000 at the date of acquisition. Starfruit's assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $13,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $16,000,000 and 5-year life, straight-line, which were capitalized following GAAP.
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Additional information:
Pomegranate uses the complete equity method to account for its investment in Starfruit on its own books. Goodwill recognized in this acquisition was impaired by a total of $3,000,000 in 2015 and 2016, and by $1,000,000 in 2017. It is now December 31, 2017, the accounting year-end. Here is Starfruit Company's trial balance at December 31, 2017: (look at picture)
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On the 2017 consolidation working paper, eliminating entry (R) reduces the Investment in Starfruit by ...
$54,980,000
On January 1, 2015, Pomegranate Company acquired 80% of the voting stock of Starfruit Company for $89,200,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $13,000,000. Starfruit's book value was $12,800,000 at the date of acquisition. Starfruit's assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $25,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $40,000,000 and 5-year life, straight-line, which were capitalized following GAAP.
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Additional information
Pomegranate uses the complete equity method to account for its investment in Starfruit on its own books. Goodwill recognized in this acquisition was impaired by a total of $2,000,000 in 2015 and 2016, and by $500,000 in 2017. It is now December 31, 2017, the accounting year-end. Here is Starfruit Company's trial balance at December 31, 2017: (look at picture)
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On the 2017 consolidated income statement, the noncontrolling interest in net income of Starfruit is ...
$330,000
On January 1, 2015, Pomegranate Company acquired 80% of the voting stock of Starfruit Company for $89,200,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $13,000,000. Starfruit's book value was $12,800,000 at the date of acquisition. Starfruit's assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $25,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $40,000,000 and 5-year life, straight-line, which were capitalized following GAAP.
If Pomegranate follows IFRS and uses the alternative method of valuing the noncontrolling interest, at the date of acquisition the noncontrolling interest in Starfruit appears in the equity section of the consolidated balance sheet in the amount of ...
$5,560,000
20% x ($12,800,000 + $40,000,000 – $25,000,000) = $5,560,000
On January 1, 2015, Pomegranate Company acquired 80% of the voting stock of Starfruit Company for $89,200,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $13,000,000. Starfruit's book value was $12,800,000 at the date of acquisition. Starfruit's assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $25,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $40,000,000 and 5-year life, straight-line, which were capitalized following GAAP.
Now assume Pomegranate paid only $20,000,000 to acquire 80% of Starfruit. The fair value of the noncontrolling interest at the date of acquisition was $4,000,000.
At the date of acquisition, consolidation eliminating entry (R) credits the noncontrolling interest in Starfruit in the amount of ...
$1,440,000
On January 1, 2015, Pomegranate Company acquired 80% of the voting stock of Starfruit Company for $70,000,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $9,400,000. Starfruit's book value was $11,600,000 at the date of acquisition. Starfruit's assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $13,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $16,000,000 and 5-year life, straight-line, which were capitalized following GAAP.
Now assume Pomegranate paid only $11,000,000 to acquire 80% of Starfruit. The fair value of the noncontrolling interest at the date of acquisition was $3,000,000.
On the 2017 consolidation working paper, eliminating entry (R) debits goodwill in the amount of ...
$0
There is no goodwill when the acquisition is a bargain purchase.
Which is the best way to measure the fair value per share of a subsidiary’s noncontrolling interest?
The per share market value of the subsidiary’s stock, in an active market
If the operating section of the consolidated statement of cash flows is displayed using the indirect method, which of the following is not an adjustment to consolidated net income?
Noncontrolling interest in net income
On the consolidated statement of cash flows, cash dividends paid to noncontrolling shareholders are
a cash outflow in the financing section.
On January 1, 2015, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for $91,700,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $6,300,000. Starfruit’s book value was $13,000,000 at the date of acquisition. Starfruit’s assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $25,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $40,000,000 and 5-year life, straight-line, which were capitalized following GAAP.
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Additional information
Pomegranate uses the complete equity method to account for its investment in Starfruit on its own books. Goodwill recognized in this acquisition was impaired by a total of $2,000,000 in 2015 and 2016, and by $500,000 in 2017. It is now December 31, 2017, the accounting year-end. Goodwill is allocated 95% to the controlling interest and 5% to the noncontrolling interest. Here is Starfruit Company’s trial balance at December 31, 2017: (look at picture)
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On the 2017 consolidated income statement, the noncontrolling interest in net income of Starfruit is ...
$175,000