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?

Question

Business

Nicholson

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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Answers (1)

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Ayanna Hubbard · Answer 1

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