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:

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

Based on the preceding information, what will be the amount of net income reported by Salmon Corporation in 20X2?

Multiple Choice

$45,000


$50,000 Correct

$75,000


$105,000

Explanation
$180,000 is the correct amount. 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).