Question
McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's
McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following:
Book value | Fair value | |
Building | 10,000 | 8,000 |
Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years. In consolidation at December 31, 2015, what adjustment is necessary for Hogan's Buildings account?
$1,440 increase.
$1,440 decrease.
$1,600 increase.
$1,600 decrease.
Please include calculations.
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