Cinema Company acquired 70 percent of Movie Corporation's shares on December 31,20X5,at underlying book value of $98,000.At that date,the fair value of the noncontrolling interest was equal to 30 percent of the book value of Movie Corporation.Movie's balance sheet on January 1,20X8,contained the following balances:
On January 1,20X8,Movie acquired 5,000 of its own $2 par value common shares from Nonaffiliated Corporation for $6 per share.

-Based on the preceding information,in the eliminating entry needed in preparing a consolidated balance sheet immediately following the acquisition of shares,Investment in Movie stock will be credited for:

Question

Cinema Company acquired 70 percent of Movie Corporation's shares on December 31,20X5,at underlying book value of $98,000.At that date,the fair value of the noncontrolling interest was equal to 30 percent of the book value of Movie Corporation.Movie's balance sheet on January 1,20X8,contained the following balances:
On January 1,20X8,Movie acquired 5,000 of its own $2 par value common shares from Nonaffiliated Corporation for $6 per share.
 
-Based on the preceding information,in the eliminating entry needed in preparing a consolidated balance sheet immediately following the acquisition of shares,Investment in Movie stock will be credited for:

Quizplus · Accepted Answer

The elimination entry needed in preparing a consolidated balance sheet includes eliminating the Investment in Movie stock account and replacing it with the fair value of the assets acquired and liabilities assumed. As per the given information, the fair value of the noncontrolling interest at the time of acquisition was 30% of the book value of Movie Corporation. Therefore, the fair value of the acquired assets and assumed liabilities will be $140,000 (70% of $200,000) and $60,000 (30% of $200,000) respectively. Thus, the eliminating entry will credit Investment in Movie stock for $135,625 [$98,000 + ($140,000 - $98,000) x 70% - $5,000 x $2].

Cinema Company Acquired 70 Percent of Movie Corporation's Shares on December