ExpertMedium1 markMultiple Choice
CPA · Question 31 · Area II: Technical Accounting
Acquirer Inc. purchases 80% of Target Co. for $800,000 cash. The fair value of the Non-Controlling Interest (NCI) is estimated at $180,000. Target Co.'s net identifiable assets have a book value of $600,000 and a fair value of $900,000. <br/><br/>What amount of Goodwill should be reported in the consolidated balance sheet?
Acquirer Inc. purchases 80% of Target Co. for $800,000 cash. The fair value of the Non-Controlling Interest (NCI) is estimated at $180,000. Target Co.'s net identifiable assets have a book value of $600,000 and a fair value of $900,000. <br/><br/>What amount of Goodwill should be reported in the consolidated balance sheet?
Answer options:
A.
$200,000
B.
$80,000
C.
$380,000
D.
$100,000
How to approach this question
Full Goodwill Method (US GAAP): (Consideration Paid + FV of NCI) - FV of Net Identifiable Assets.
Full Answer
B.$80,000✓ Correct
Goodwill = (Consideration Transferred + Fair Value of NCI) - Fair Value of Identifiable Net Assets.<br/>Goodwill = ($800,000 + $180,000) - $900,000 = $80,000.
Common mistakes
Using book value of assets; ignoring NCI.
Practice the full CPA BAR Practice Exam 4
50 questions · hints · full answers · grading
More questions from this exam
Q01Orion Corp. is analyzing its working capital efficiency. For the current year, Orion reported the...HardQ02A company is analyzing its gross margin variance. The budgeted data for the quarter indicated sal...MediumQ03TechSolutions Inc. reports the following financial data:<br/>- Net Income: $5,000,000<br/>- Inter...HardQ04Manufacturing Corp. uses Activity-Based Costing (ABC). The company has identified two cost pools:...MediumQ05During the current month, a company purchased 20,000 pounds of raw material for $42,000. The stan...Medium