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

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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