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. Starfruit's book value was $13,000,000 at the date of acquisition. Starfruit's 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. 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 O$6,700,000 O$4,900,000 O$2,000,000 O$ 700,000
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. Starfruit's book value was $13,000,000 at the date of acquisition. Starfruit's 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. 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 O$6,700,000 O$4,900,000 O$2,000,000 O$ 700,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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
Transcribed Image Text: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. Starfruit's book value was
$13,000,000 at the date of acquisition. Starfruit's 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.
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
O$6,700,000
O$4,900,000
O$2,000,000
O$ 700,000

Transcribed Image Text: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. Starfruit's book value was $13,000,000 at the date of acquisition.
Starfruit's 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.
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 $0
O$ 11,300,000
O$53,700,000
O$68,000,000
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