McGuire Company acquired 90 percent of Hogan Company on January 1, 2010, for $23
ID: 2475110 • Letter: M
Question
McGuire Company acquired 90 percent of Hogan Company on January 1, 2010, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following:
Book value Fair value
Buildings (10 year life) 10,000 8,000
Equipments ( 4 year life) 14,000 18,000
Land 5,000 12,000
Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years. The acquisition value attributable to the non-controlling interest at January 1, 2014 is?
Explanation / Answer
Total Share holders liability = $ 160,000 + $ 80,000 = $ 240,000
Total Fair value = $ 240,000 - Revaluation difference
= $ 240,000 - (-2000+4000+7000)
= $ 231,000
Excess paid = $ 234,000 - $ 231,000 = $ 3,000
Patent amount to be amortized over 5 years
Amount available = $ 3,000 - (3000/5*4) = $ 600.