Question

A parent acquired 90% of the voting stock of a subsidiary for $20,000. The fair value of the noncontrolling interest was $2,000. The subsidiary's book value at the date of acquisition was $1,000. Following is revaluation information for the subsidiary's identifiable net assets at the date of acquisition:

	Fair Value – Book Value
Inventories	$   (400)
Equipment	(10,000)
Identifiable intangibles	16,000

What is the amount of consolidated goodwill attributed to the noncontrolling interest at the date of acquisition, following U.S. GAAP?

	A.	$1,340
	B.	$1,440
	C.	$1,540
	D.	$0

Answer 1

Answer -

Calculation of amount of consolidated goodwill attributed to the noncontrolling interest -

	Particulars	Explanation	Amount ($)
I.	Acquisition cost	Given in question	20000
II.	Noncontrolling interest	Given in question	2000
III.	Total fair value	I + II	22000
IV.	Subsidiary's book value	Given in question	1000
V.	Revaluations: Inventories	Given in question	(400)
VI.	Revaluations: Equipment	Given in question	(10000)
VII.	Revaluations: Identifiable intangibles	Given in question	16000
VIII.	Goodwill	III - (IV + V + VI + VII)	15400
IX.	Goodwill to the controlling interest	I - [90% * (IV + V + VI + VII)]	14060
Goodwill attributed to the noncontrolling interest		VIII - IX	1340

Hence, Option - (A) is Correct.