Question

On January 1, Tesco Company spent a total of $4,144,000 to acquire control over Blondel Company. This price was based on paying $499,000 for 20 percent of Blondel’s preferred stock and $3,645,000 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 $405,000. The fair value of the 80 percent of Blondel’s preferred shares not owned by Tesco was $1,996,000. 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		3,140,000
Total stockholders’ equity	$	6,140,000

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?

$306,500.

$499,000.

$904,000.

$405,000.

Answer 1

The consolidated goodwill is $405,000 which is calculated below:-
Particulars	Amount ($)
Consideration transferred for preferred stock	499,000
Consideration transferred for common stock	3,645,000
Non-controlling interest fair value of preferred stock	1,996,000
Non-controlling interest fair value of common stock	405,000
Acquisition-date fair value	6,545,000
Less : Acquisition-date identified net asset	6,140,000
Goodwill	405,000