Pine Company purchased a 60% interest in the Scent Company on January 1, 2016 for $360,000.On that date, the stockholders' equity of Scent Company was $450,000.Any excess cost on 1/1/16 was attributable to goodwill.Pine purchased another 20% interest on January 1, 2019 for $200,000.On January 1, 2019, Scent Company's stockholders' equity was $700,000, the entire increase due to retained earnings.The excess of cost over book on the new block of stock is ____.
A)$60,000
B)$50,000
C)$48,000
D)$20,000

Question

Pine Company purchased a 60% interest in the Scent Company on January 1, 2016 for $360,000.On that date, the stockholders' equity of Scent Company was $450,000.Any excess cost on 1/1/16 was attributable to goodwill.Pine purchased another 20% interest on January 1, 2019 for $200,000.On January 1, 2019, Scent Company's stockholders' equity was $700,000, the entire increase due to retained earnings.The excess of cost over book on the new block of stock is ____.
A)​$60,000
B)​$50,000
C)​$48,000
D)​$20,000

Quizplus · Accepted Answer

The excess cost over book value for the new block of stock is calculated as follows: The book value of the 20% interest on January 1, 2019 is 20% of $700,000, which is $140,000. Pine paid $200,000 for this interest, so the excess cost over book value is $200,000 - $140,000 = $60,000.

Pine Company Purchased a 60% Interest in the Scent Company