The following information applies to Questions 21-26
On December 31, 20X8, X Company acquired controlling ownership of Y Company. A consolidated balance sheet was prepared immediately. Partial balance sheet data for the two companies and the consolidated entity at that date follow:
During 20X8, X Company provided consulting services to Y Company and has not yet paid for them. There were no other receivables or payables between the companies at December 31, 20X8.

-Rohan Corporation holds assets with a fair value of $150,000 and a book value of $125,000 and liabilities with a book value and fair value of $50,000.What balance will be assigned to the noncontrolling interest in the consolidated balance sheet if Helms Company pays $90,000 to acquire 75 percent ownership in Rohan and goodwill of $20,000 is reported?
A) $50,000
B) $30,000
C) $40,000
D) $20,000

Question

The following information applies to Questions 21-26
On December 31, 20X8, X Company acquired controlling ownership of Y Company. A consolidated balance sheet was prepared immediately. Partial balance sheet data for the two companies and the consolidated entity at that date follow:
During 20X8, X Company provided consulting services to Y Company and has not yet paid for them. There were no other receivables or payables between the companies at December 31, 20X8.
 
-Rohan Corporation holds assets with a fair value of $150,000 and a book value of $125,000 and liabilities with a book value and fair value of $50,000.What balance will be assigned to the noncontrolling interest in the consolidated balance sheet if Helms Company pays $90,000 to acquire 75 percent ownership in Rohan and goodwill of $20,000 is reported?
A) $50,000 
B) $30,000 
C) $40,000 
D) $20,000

Quizplus · Accepted Answer

The noncontrolling interest can be calculated by subtracting the amount allocated to the controlling interest from the total equity of the subsidiary.

Total equity of Rohan Corporation = (Fair value of assets – Fair value of liabilities) + Goodwill 
= ($150,000 - $50,000) + $20,000 
= $120,000

Amount allocated to the controlling interest = 75% x ($125,000 + $20,000 - $50,000) 
= $93,750

Noncontrolling interest = $120,000 - $93,750 
= $26,250

However, the question asks for the balance assigned to the noncontrolling interest in the consolidated balance sheet. As the question does not give any information about the fair value of the noncontrolling interest, we assume that it is proportionally the same as the percentage of ownership.

So the noncontrolling interest on the consolidated balance sheet = 25% x $26,250 
= $6,562.50 
= $6,500 (rounded)

Therefore, the correct answer is B. $30,000 - $6,500 (noncontrolling interest) = $23,500 belonging to the controlling interest in the consolidated entity.

The Following Information Applies to Questions 21-26