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4 July, 05:01

Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float's net assets was $1,850,000, and the book value was $1,500,000. The non-controlling interest shares of Float Corp. are not actively traded. What amount of goodwill should be attributed to the non-controlling interest at the date of acquisition

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  1. 4 July, 08:47
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    Complete question:

    Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float's net assets was $1,850,000, and the book value was $1,500,000. The non-controlling interest shares of Float Corp. are not actively traded. What amount of goodwill should be attributed to the non-controlling interest at the date of acquisition?

    a. 150,000

    b. 250,000

    c. 0

    d. 120,000

    e. 170,000

    Answer:

    150,000 of goodwill should be attributed to the non-controlling interest at the date of acquisition

    Solution:

    A non-controlling interest (NCI) is a role in which a owner holds less than 50% of remaining and has little control over decisions. A minority ownership is often known as the minority interest. Non-controlling interests are calculated by their net worth and are not eligible for future right to vote.

    Now, Calculate the amount

    Cost (PP) - 1,600/0.8 = 2,000

    FV - 1,850

    GW = 1,850 - 2,000

    = 150,000
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