On January 1, 2018, 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. Starfruits book value was $13,000,000 at the date of acquisition. Starfruits 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.
At the date of acquisition, consolidation eliminating entry (R) credits the noncontrolling interest in Starfruit Company in the amount of
$1,500,000
$5,000,000
$6,300,000
$8,500,000
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 2018 and 2019, and by $500,000 in 2020. It is now December 31, 2020, the accounting year-end. Here is Starfruit Companys trial balance at December 31, 2020:
			Dr (Cr)
Current assets			$28,200,000
Plant & equipment, net			188,000,000
Intangibles			2,000,000
Liabilities			-180,000,000
Capital stock			-1,000,000
Retained earnings, January 1			-29,500,000
Acumulated other comprehensive income, January 1			-500,000
Dividends			400,000
Sales revenue			-24,000,000
Cost of goods sold			10,000,000
Operating expenses			6,500,000
Other comprehensive income			-100,000
			$0
QUESTION 2
On the 2020 consolidation working paper, eliminating entry (R) reduces the Investment in Starfruit by
$3,600,000
$64,800,000
$68,200,000
$81,000,000
QUESTION 3
On the 2020 consolidated income statement, the noncontrolling interest in net income of Starfruit is
$150,000
$175,000
$200,000
$750,000
QUESTION 4
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
$7,800,000
$6,300,000
$2,800,000
$1,300,000
QUESTION 5
If Pomegranate follows IFRS and uses the alternative method of valuing the noncontrolling interest, the 2020 noncontrolling interest in comprehensive income of Starfruit is
$185,000
$300,000
$210,000
$200,000
QUESTION 6
Not complete
Marked out of 1.00
Now assume Pomegranate paid only $20,000,000 to acquire 90% of Starfruit. The fair value of the noncontrolling interest at the date of acquisition was $2,000,000.
At the date of acquisition, consolidation eliminating entry (R) credits the noncontrolling interest in Starfruit in the amount of
$6,700,000
$4,900,000
$2,000,000
$700,000
QUESTION 7
Not complete
Now assume Pomegranate paid only $20,000,000 to acquire 90% of Starfruit. The fair value of the noncontrolling interest at the date of acquisition was $2,000,000.
On the 2020 consolidation working paper, eliminating entry (R) debits goodwill in the amount of
$0
$11,300,000
$53,700,000
$68,000,000
QUESTION 8
Which is the best way to measure the fair value per share of a subsidiarys noncontrolling interest?
The per share market value of the subsidiarys stock, in an active market, less a discount for lack of control
The price per share that the parent paid for the subsidiarys stock
The price per share that the parent paid for the subsidiarys stock, plus a premium for lack of control
The per share market value of the subsidiarys stock, in an active market
QUESTION 9
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?
Goodwill impairment loss
Noncontrolling interest in net income
Undistributed equity method income
Amortization expense on previously unreported identifiable intangibles
QUESTION 10
On the consolidated statement of cash flows, cash dividends paid to noncontrolling shareholders are
a cash outflow in the financing section.
an adjustment to income when the indirect method is used for the operating section.
a cash outflow in the investing section.
not reported.