Pine & Scent scenario:
Pine Company purchased a 60% interest in the Scent Company on January 1, 20X1 for $360,000. On that date, the stockholders' equity of Scent Company was $450,000. Any excess cost on 1/1/X1 was attributable to goodwill. Pine purchased another 20% interest on January 1, 20X4 for $200,000. On January 1, 20X4, Scent Company's stockholders' equity was $700,000, the entire increase due to retained earnings.
-Refer to the Pine and Scent scenario. The excess of cost over book on the new block of stock is ____.

Question

Quizplus · Accepted Answer

The excess of cost over book value for the new 20% interest is calculated as follows: 20% of Scent's stockholders' equity on January 1, 20X4 is $140,000 (20% of $700,000). Pine paid $200,000 for this interest, so the excess cost over book value is $200,000 - $140,000 = $60,000.

Pine & Scent Scenario