2. D At the date control is obtained, the parent consolidates subsidiary assets at fair value ($500,000 in this case) regardless of the parent’s percentage ownership.
3. D In consolidating the subsidiary's figures, all intra-entity balances must be eliminated in their entirety for external reporting purposes. Even though the subsidiary is less than fully owned, the parent nonetheless controls it.
4. C An asset acquired in a business combination is initially valued at 100% acquisition-date fair value and subsequently amortized its useful life. Patent fair value at January 1, 2012 $45,000 Amortization for 2 years (10 year life) (9,000) Patent reported amount December 31, 2013 $36,000
5. C
6. B Combined revenues $1,100,000 Combined expenses (700,000) Excess acquisition-date fair value amortization (15,000) Consolidated net income $385,000 Less: noncontrolling interest ($85,000 × 40%) (34,000) Consolidated net income to controlling interest $351,000
7. C Consideration transferred by Pride $540,000 Noncontrolling interest fair value 60,000 Star acquisition-date fair value $600,000 Star book value 420,000 Excess fair over book value $180,000
Amort. to equipment (8 year remaining life) $ 80,000 $10,000 to customer list (4 year remaining life) 100,000 25,000 $35,000
Combined revenues $783,000 Combined expenses $545,000 Excess fair value amortization 35,000 580,000 Consolidated net income $203,000
8. A Under the equity method, consolidated RE = parent’s RE.
9. B
10. A Amie, Inc. fair value at July 1, 2013: 30% previously owned fair value (30,000 shares × $5) $150,000 60% new shares acquired (60,000 shares × $6) 360,000 10% NCI fair value (10,000 shares × $5) 50,000 Acquisition-date fair value $560,000 Net assets' fair value 500,000 Goodwill $ 60,000
11. C
12. B Fair value of 30% noncontrolling interest on April 1 $165,000 30% of net income for remainder of year ($240,000 × 30%) 72,000 Noncontrolling interest December 31 $237,000
13. C Proceeds of $80,000 less $64,000 (⅓ × $192,000) book value = $16,000 Control is maintained so excess proceeds go to APIC.
14. B Combined revenues $1,300,000 Combined expenses (800,000) Trademark amortization (6,000) Patented technology amortization (8,000) Consolidated net income $486,000
15. C Subsidiary income ($100,000 – $14,000 excess amortizations) $86,000 Noncontrolling interest percentage 40% Noncontrolling interest in subsidiary income $34,400 Fair value of noncontrolling interest at acquisition date $200,000 40% change in Solar book value since acquisition 52,000 Excess fair value amortization ($14,000 × 40% × 2 years) (11,200) Noncontrolling interest at end of year $240,800
16. A West trademark balance $260,000 Solar trademark balance 200,000 Acquisition-date fair value allocation 60,000 Excess fair value amortization for two years (12,000) Consolidated trademarks $508,000
17. A Acquisition-date fair value ($60,000 ÷ 80%) $75,000 Strand's book value (50,000) Fair value in excess of book value $25,000 Excess assigned to inventory (60%) $15,000 Excess assigned to goodwill (40%) $10,000
Park current assets $70,000 Strand current assets 20,000 Excess inventory fair value 15,000 Consolidated current assets $105,000
18. D Park noncurrent assets $90,000 Strand noncurrent assets 40,000 Excess fair value to goodwill 10,000 Consolidated noncurrent assets $140,000
19. B Add the two book values and include 10% (the $6,000 current portion) of the loan taken out by Park to acquire Strand.
20. B Add the two book values and include 90% (the $54,000 noncurrent portion) of the loan taken out by Park to acquire Strand.
21. C Park stockholders' equity $80,000 Noncontrolling interest at fair value (20% × $75,000) 15,000 Total
