EXAM 2 REVIEW 1.A company issues 1,000,000 shares of new stock with a fair value of $25/share to acquire 80% of the stock of another company. Registration fees for shares issued are $700,000 paid in cash. Out-of-pocket consulting fees connected with the acquisition are $500,000, paid in cash. There is an earnings contingency with an expected present value of $1,000,000. The fair value of the noncontrolling interest at the date of acquisition is $5,000,000, and the book value of the acquired company is $4,000,000. The acquired company has previously unreported identifiable intangible assets of $7,000,000, and its noncurrent assets are overvalued by $2,000,000. What is the total reported goodwill on this acquisition, following U.S. GAAP?
2.A company issues 1,000,000 shares of new stock with a fair value of $25/share (par value $15) to acquire 80% of the stock of another company. Registration fees for shares issued are $700,000 paid in cash. Out-of-pocket consulting fees connected with the acquisition are $500,000, paid in cash. There is an earnings contingency with an expected present value of $1,000,000. The fair value of the noncontrolling interest at the date of acquisition is $5,000,000 and the book value of the acquired company is $4,000,000. The acquired company has previously unreported identifiable intangible assets of $7,000,000, and its noncurrent assets are overvalued by $2,000,000. The parent and the subsidiary company's Additional Paid-in Capital are 5,000,000 and 3,000,000 before acquisition occurs. What is the consolidated Additional Paid-in Capital at the date of acquisition, following U.S. GAAP? a. 8,000,000 b. 5,000,000 c. 17,300,000 d. 4,300,000 e. 4,300,000 f. 14,300,000
3.Lowell Company acquired 90 percent of Boston Company's 100,000 outstanding shares on January 1, 2019, for $234,000 cash. Boston's share was actively traded at $2.50 per share on the market, which is deemed as the NCI's fair value per share. Boston's stockholders' equity consisted of common stock of $120,000 and retained earnings of $80,000. An analysis of Boston's net assets revealed the following: Book Value Fair Value Buildings (10-year life)$10,000$8,000 Equipment (4-year lie)14,00018,000 Land5,00012,000 Any excess consideration transferred over fair value is attributable to Goodwill. On 12/31/2020, Boston reports net income of $40,000 and paid dividends of $10,000. What is the goodwill attributable to NCIfor this acquisition on 1/1/2019? a.$45,000 b.$50,000 c.$5,000 d.$4,100 e.$45,900
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