On January 1,20X8,Ramon Corporation acquired 75 percent of Tester Company's voting common stock for $300,000.At the time of the combination,Tester reported common stock outstanding of $200,000 and retained earnings of $150,000,and the fair value of the noncontrolling interest was $100,000.The book value of Tester's net assets approximated market value except for patents that had a market value of $50,000 more than their book value.The patents had a remaining economic life of ten years at the date of the business combination.Tester reported net income of $40,000 and paid dividends of $10,000 during 20X8.
-Based on the preceding information,which of the following is an eliminating entry needed to prepare a full set of consolidated financial statements at December 31,20X8?
A)Choice A
B)Choice B
C)Choice C
D)Choice D

Question

Quizplus · Accepted Answer

The eliminating entry should adjust for the excess of fair value over book value of the patents, allocate the excess to the controlling and noncontrolling interests, and account for the amortization of the excess fair value over the patent's useful life.

On January 1,20X8,Ramon Corporation Acquired 75 Percent of Tester Company's