Question

Assume that on July 1, 2019, a parent company paid $1,504,800 to purchase a 75% interest in a subsidiary's voting common stock. On that date, the fair value of the 25% interest not purchased by the parent company is $500,000. The acquisition-date fair value of the identifiable net assets of the subsidiary is $1,920,000. What is the amount of goodwill assigned to the controlling and noncontrolling interests, respectively, on the acquisition date

Answer 1

Answer:

Goodwill assigned to the controlling:

= Amount paid to acquire 75% share - Share in fair value of the identifiable net assets

= $1,504,800 - ($1,920,000*75%)

= $1,504,800 - $1,440,000

= $64,800

Goodwill assigned to the non-controlling interests:

= Fair vale of the 25% interest - Share in fair value of the identifiable net assets

= $500,000 - ($1,920,000*25%)

= $500,000 - $480,000

= $20,000