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16 February, 11:14

On January 1, Tesco Company spent a total of $4,332,000 to acquire control over Blondel Company. This price was based on paying $471,000 for 20 percent of Blondel's preferred stock and $3,861,000 for 90 percent of its outstanding common stock. At the acquisition date, the fair value of the 10 percent noncontrolling interest in Blondel's common stock was $429,000. The fair value of the 80 percent of Blondel's preferred shares not owned by Tesco was $1,884,000. Blondel's stockholders' equity accounts at January 1 were as follows:

Preferred stock-9%, $100 par value, cumulative and participating;

10,000 shares outstanding

$ 1,000,000

Common stock-$50 par value; 40,000 shares outstanding 2,000,000

Retained earnings 3,370,000

Total stockholders' equity $ 6,370,000

Tesco believes that all of Blondel's accounts approximate their fair values within the company's financial statements. What amount of consolidated goodwill should be recognized?

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  1. 16 February, 14:07
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    The consolidated goodwill will be of 275,000

    Explanation:

    fair value of the controlling interest:

    purchased preferred stock: 471,000

    purchased common stock: 3,861,000

    Total 4,332,000

    fair value of the non-controlling interest:

    fair value of 10% CS 429,000

    fair value of 80% PS 1,884,000

    Total non-controlling 2,313,000

    Acquisition-date fair value: 6,645,000

    acquisition-date net asset fair value: 6,370,000

    goodwill diff: 6,645,000 - 6,370,000 = 275,000
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