On January 1, 2013, Nichols Company acquired 80% of Smith Company's common stock and 40% of its non-voting, cumulative preferred stock. The consideration transferred by Nichols was $1,200,000 for the common and $124,000 for the preferred. Any excess acquisition-date fair value over book value is considered goodwill. The capital structure of Smith immediately prior to the acquisition is: Compute the goodwill recognized in consolidation.
A) $800,000.
B) $310,000.
C) $124,000.
D) $0.
E) $(196,000.)

Question

On January 1, 2013, Nichols Company acquired 80% of Smith Company's common stock and 40% of its non-voting, cumulative preferred stock. The consideration transferred by Nichols was $1,200,000 for the common and $124,000 for the preferred. Any excess acquisition-date fair value over book value is considered goodwill. The capital structure of Smith immediately prior to the acquisition is:  Compute the goodwill recognized in consolidation.
A) $800,000. 
B) $310,000. 
C) $124,000. 
D) $0. 
E) $(196,000.)

Quizplus · Accepted Answer

Consideration for Common & Preferred Stock ($1,200,000 + $124,000) + Non-Controlling Interest Value ($300,000 + $186,000) = FV $1,810,000 - BV $1,500,000 = $310,000 Goodwill

On January 1, 2013, Nichols Company Acquired 80% of Smith