Question
Pot Inc. acquired an 80 percent interest in the common shares of Shot Inc. on July 1, Year 5, for $264,000. The equity sections of
Pot Inc. acquired an 80 percent interest in the common shares of Shot Inc. on July 1, Year 5, for $264,000. The equity sections of the statements of financial position for Pot and Shot at December 31, Year 4, were as follows:
Pot | Shot | |
Common shares | $ 400,000 | $ 200,000 |
Preferred shares (10,000 8% shares redeemable at $13 each) | 100,000 | |
Retained earnings | 70,000 | 60,000 |
Total | $ 470,000 | $ 360,000 |
Additional Information:
The after-tax profit of Shot for Year 5 amounted to $60,000 and was earned evenly throughout the year.
The preferred shares are cumulative and nonvoting.
Dividends on the preferred shares are payable on June 30 and December 31 each year. Dividends were two years in arrears on December 31, Year 4, and were not paid on June 30, Year 5.
Assume Pot did not purchase any of Shots preferred shares on July 1, Year 5.
a) When Pot Inc. calculates goodwill arising from its purchase of Shot Inc., which of the following represents the claim of the preferred shareholders at redemption (other than dividends in arrears) on Shots net asset position?
b) When Pot Inc. consolidates Shot Inc. immediately after acquisition, what amount will be presented as non-controlling interest related to common shares?
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