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.

 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:

  
Noncontrolling interest was assigned income of $15,000 in Piranha’s consolidated income statement for 20X2.

Based on the preceding information, what is the total stockholders' equity in the consolidated balance sheet as of January 2, 20X2?

Multiple Choice

$1,120,000


$1,300,000


$1,480,000 Correct

$1,900,000

Explanation
$1,480,000 is correct. Total stockholders’ equity in the consolidated balance sheet as of January 2, 20X2 consists of the total controlling interest and the noncontrolling interest in the net assets of Salmon Corporation. The calculation is depicted below.

$1,120,000 is incorrect. The noncontrolling interest in the net assets of Salmon Corporation is added to the total controlling interest to arrive at total stockholders’ equity in the consolidated balance sheet as of January 2, 20X2.

$1,300,000 is incorrect. The noncontrolling interest in the net assets of Salmon Corporation must be included in the consolidated balance sheet. This answer choice only includes the total controlling interest.

$1,900,000 is incorrect. Consolidation entries are made on the consolidation worksheet to eliminate the common stock, additional paid-in capital and retained earnings of Salmon Corporation. Thus, the total stockholders’ equity balances from the two companies cannot be added together.