On January 1, Tesco Company spent a total of $4,144,000 to acquire control over
ID: 2432269 • Letter: O
Question
On January 1, Tesco Company spent a total of $4,144,000 to acquire control over Blondel Company. This price was based on paying $499,000 for 20 percent of Blondel’s preferred stock and $3,645,000 for 90 percent of its outstanding common stock. At the acquisition date, the fair value of the 10 percent noncontrolling interest in Blondel’s common stock was $405,000. The fair value of the 80 percent of Blondel’s preferred shares not owned by Tesco was $1,996,000. Blondel’s stockholders’ equity accounts at January 1 were as follows:
Tesco believes that all of Blondel’s accounts approximate their fair values within the company’s financial statements. What amount of consolidated goodwill should be recognized?
$306,500.
$499,000.
$904,000.
$405,000.
Preferred stock—9%, $100 par value, cumulative and participating; 10,000 shares outstanding $ 1,000,000 Common stock—$50 par value; 40,000 shares outstanding 2,000,000 Retained earnings 3,140,000 Total stockholders’ equity $ 6,140,000Explanation / Answer
The consolidated goodwill is $405,000 which is calculated below:- Particulars Amount ($) Consideration transferred for preferred stock 499,000 Consideration transferred for common stock 3,645,000 Non-controlling interest fair value of preferred stock 1,996,000 Non-controlling interest fair value of common stock 405,000 Acquisition-date fair value 6,545,000 Less : Acquisition-date identified net asset 6,140,000 Goodwill 405,000