Question

On January 3, 20X9, Redding Company acquired 80 percent of Frazer Corporation's common stock for $344,000 in cash. At the acquisition date, the book values and fair values of Frazer's assets and liabilities were equal, and the fair value of the noncontrolling interest was equal to 20 percent of the total book value of Frazer. The stockholders' equity accounts of the two companies at the acquisition date are:

REDDING: Common Stock ($5 par) $500,000; Additional Paid-in capital $300,000; Retained Earnings $350,000.
FRAZER: Common Stock ($5 par) $200,000; Additional Paid-in capital $80,000; Retained Earnings $150,000.

Noncontrolling interest was assigned income of $11,000 in Redding's consolidated income statement for 20X9. Based on the preceding information, what amount will be assigned to the noncontrolling interest on January 3, 20X9, in the consolidated balance sheet?

(A) 86,000
(B) $44,000
(C) $68,800
(D) $50,000

Answer 1

Answer:

(A) 86,000

Explanation:

common stock + additional paid in + retained earnings = equity

200,000 + 80,000 + 150,000 = 430,000

344,000 is 80%

then: 86,000 will represent the 20%

We are asked for the amount of non-controlling interest then that will be 20% of the equity of Frazer which is in possesion of other stockholders.