Question
On January 1, 2014, Woody Company acquires 80% of the outstanding common stock of Buzz, for a purchase price of $785,000.It was determined that the
On January 1, 2014, Woody Company acquires 80% of the outstanding common stock of Buzz, for a purchase price of $785,000.It was determined that the fair market value of the noncontrolling interest in the subsidiary is $190,000.The book value of the Buzz's stockholders' equity on the date of acquisition is$500,000 and its fair market value of identifiable tangible and intangible assets is $900,000.The excess fair market value over book value is allocated $200,000 to equipment with a remaining useful life of 10 years, and $200,000 to a patent with a remaining useful life of 8 years.
1) The journal entry (on Woody's books) to recognize the acquisition date AAP assets and allocate the ownership interest in those assets to the parent and noncontrolling interests (entry A) includes:
a. Equity investment, credit, $400,000
b. Noncontrolling interest, credit, $100,000
c. Buzz retained earnings, debit, $332,500
d. Noncontrolling interest, credit, $90,000
2) What is the acquisition accounting premium (AAP)?
a. $475,000
b. $375,000
c. $400,000
d. $425,000
Buzz's property, plant and equipment balance is undervalued by $500,000.Woody has assigned a useful life of 50 years.Determine the total goodwill to be recognized at acquisition date.
a. $125,000
b. $80,000
c. $75,000
d. None of the above answers is correct
What portion of the AAP should be assigned to noncontrolling interest?
a. $90,000
b. $75,000
c. $-0-
d. $100,000
Assume that during the year ended December 31, 2014, Buzz reports net income of $210,000 and pays dividends of $21,000.Determine the December 31, 2014 ending balance in Woody Company's equity investment account.(Hint:Do not overlook the effect of amortization AAP assets).
a. $794,500
b. $785,000
c. $860,600
d. $824,600
Given the information in the previous question, determine the December 31, 2014 amount of the noncontrolling interest.
a. $190,000
b. $199,900
c. $211,000
d. $208,900
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