Question
On January 1, 2015, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for $48,200,000 in cash. The fair value of the noncontrolling
On January 1, 2015, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for $48,200,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $3,100,000. Starfruit's book value was $6,800,000 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 $14,500,000. Starfruit Company had previously unreported intangible assets, with a market value of $18,400,000 and 5-year life, straight-line, which were capitalized following GAAP.
Now assume Pomegranate paid only $8,000,000 to acquire 90% of Starfruit. The fair value of the noncontrolling interest at the date of acquisition was $750,000.
At the date of acquisition, consolidation eliminating entry (R) credits the noncontrolling interest in Starfruit in the amount of
$4,900,000
$750,000
$ 70,000
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