Question

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?

Answer 1

The consolidated goodwill will be of 275,000

Step-by-step 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