On January 2, 20X2, Piranha Company acquired 70 percent of Salmon Corporation’s common stock for $420,000 cash. At the acquisition date, the book values and fair values of Salmon’ assets and liabilities were equal, and the fair value of the noncontrolling interest was equal to 30 percent of the total book value of Salmon. The stockholders’ equity accounts of the two companies at the acquisition date are as follows:

 On January 2, 20X2, Piranha Company acquired 70 percent of Salmon Corporation’s common stock for $420,000 cash. At the acquisition date, the book values and fair values of Salmon’ assets and liabilities were equal, and the fair value of the noncontrolling interest was equal to 30 percent of the total book value of Salmon. The stockholders’ equity accounts of the two companies at the acquisition date are as follows:

    

Based on the preceding information, what amount will be assigned to noncontrolling interest on January 2, 20X2, in the consolidated balance sheet?

Multiple Choice

$120,000


$126,000



$180,000 Correct



$420,000

 

Explanation
$180,000 is correct. Piranha Company acquired 70 percent of Salmon Corporation for $420,000. The total fair value of Salmon’s net assets on January 2, 20X2 is thus $600,000 ($420,000 ÷ 70 percent). The value assigned to the NCI shareholders on January 2, 20X2 is $180,000 ($600,000 – $420,000).