On the 2017 consolidated income statement, the noncontrolling interest in net income of Starfruit is On January

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On the 2017 consolidated income statement, the noncontrolling interest in net income of Starfruit is 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.

a. $150,000

b. $175,000

c. $200,000

d. \($750,000\) 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:

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Advanced Accounting

ISBN: 978-1618531513

3rd Edition

Authors: Susan S. Hamlen

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