Notes Ch 4 - Consolidated Financial Statements and Outsider Ownership

Notes Ch 4 - Consolidated Financial Statements and Outsider Ownership

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ACCT 456: C HAPTER 4 N OTES C ONSOLIDATED F INANCIAL S TATEMENTS UTSIDE O WNERSHIP Outside ownership exists when the parent company has controlling interest of, but does not own 100% of the subsidiary’s outstanding stock. The outside interest is termed the noncontrolling interest or NCI. When using the acquisition method, the parent will record and measure on the acquisition date the: Identifiable assets acquired and liabilities assumed at the full (100%) fair values Noncontrolling interest at its fair value. Goodwill or Gain on bargain purchase . Assume that on 1/1/2015 Peachtree Inc purchased 75% of the 150,000 outstanding shares of Nectarine Company for $37.00 each. Prior to the acquisition Nectarine shares had been trading at about $32 per share and after the acquisition, Nectarine’s noncontrolling shares continued to trade at about $32 per share. In this case there is an acquisition premium. Compute the total acquisition date fair value of Nectarine: Fair value of controlling interest (150K * $37 * 75%) ............................. $4,162,500 Fair value of noncontrolling interest (150K * 25% * $32). ....................... 1,200,000 Total acquisition date fair value of Nectarine ............................................ $5,362,500 If the net identifiable assets have a fair value of $4,800,000, compute the goodwill attributed to Peachtree and Nectarine. Peachtree Nectarine Fair Value at acquisition date. ........................................ 4,162,500 1,200,000 Less: Relative fair value of net assets (75%, 25%). ...... 3,600,000 1,200,000 Goodwill ............................................................................ 526,500 -0- W ORK THROUGH C H 4 EXAMPLE ON E XCEL SHEET .
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This note was uploaded on 02/20/2012 for the course ACC 3101 taught by Professor Tom during the Spring '11 term at American University in Bulgaria.

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Notes Ch 4 - Consolidated Financial Statements and Outsider Ownership

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