Question

On January 3, 20X9, Pleat Company acquired 80 percent of Stitch Corporation's common stock for $344,000 in cash. At the acquisition date, the book values and fair values of Stitch's assets and liabilities were equal, and the fair value of the noncontrolling interest was equal to 20 percent of the total book value of Stitch. The stockholders' equity accounts of the two companies at the acquisition date are:

Answer 1

Answer:

The below part of the question is missing

The stockholders' equity accounts of the two companies at the acquisition date are: PLEAT: Common Stock ($5 par) $500,000; Additional Paid-in capital $300,000; Retained Earnings $350,000. STITCH: Common Stock ($5 par) $200,000; Additional Paid-in capital $80,000; Retained Earnings $150,000. Non-controlling interest was assigned income of $11,000 in Pleat's consolidated income statement for 20X9. Based on the preceding information

$1,580,000

$1,064,000

$1,150,000

$1,236,000

The last option $ 1,236,000 is correct

Explanation:

The stockholders' equity accounts of the two companies(consolidated accounts) at acquisition date is the total stockholders' equity of Pleat plus the non-controlling interest in Stitch

The stockholders' equity in Pleat=$500,000+$300,000+$350,000=$1,150,000

Non-controlling interest in Stitch=book value*20%=($200,000+$80,000+$150,000)*20%=$86000

Total stockholders' equity =$1,150,000+$86,000 =$ 1,236,000.00