On January 1, 2013, Harrison Corporation spent $2,600,000 to acquire control over Involved, Inc. This price was based on paying $750,000 for 30 percent of Involved's preferred stock, and $1,850,000 for 80 percent of its outstanding common stock. As of the date of the acquisition, Involved's stockholders' equity accounts were as follows: What is the total acquisition-date fair value of Involved?
A) $2,600,000
B) $4,812,500
C) $3,062,500
D) $2,312,500
E) $3,250,000

Question

On January 1, 2013, Harrison Corporation spent $2,600,000 to acquire control over Involved, Inc. This price was based on paying $750,000 for 30 percent of Involved's preferred stock, and $1,850,000 for 80 percent of its outstanding common stock. As of the date of the acquisition, Involved's stockholders' equity accounts were as follows:  What is the total acquisition-date fair value of Involved?
A) $2,600,000 
B) $4,812,500 
C) $3,062,500 
D) $2,312,500 
E) $3,250,000

Quizplus · Accepted Answer

Common Stock Non-Controlling Interest at Acquisition = $1,850,000/.80 = $2,312,500Preferred Stock Non-Controlling Interest at Acquisition = $750,000/.30 = $2,500,000$2,312,500 + $2,500,000 = $4,812,500 FV of Sub at Acquisition$1,850,000 + $462,500 + $750,000 + $1,750,000 = $4,812,500

On January 1, 2013, Harrison Corporation Spent $2,600,000 to Acquire