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 non-controlling interest in Smith at date of acquisition.
A) $486,000.
B) $480,000.
C) $300,000.
D) $150,000.
E) $120,000.

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 non-controlling interest in Smith at date of acquisition.
A) $486,000. 
B) $480,000. 
C) $300,000. 
D) $150,000. 
E) $120,000.

Quizplus · Accepted Answer

Common Stock Non-Controlling Interest at Acquisition = $1,200,000/.80 = $1,500,000 × .20 = $300,000Preferred Stock Non-Controlling Interest at Acquisition = $124,000/.40 = $310,000 × .60 = $186,000$300,000 + $186,000 = $486,000 Non-Controlling Interest at Acquisition Date

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