On January 1 2011 Pride Co. purchased 90 percent of the outstanding voting shares of Star Inc. for $540000 cash The acquisition-date fair value of the noncontrolling interest was
On January 1, 2011, Pride Co. purchased 90 percent of the outstanding voting shares of Star Inc. for $540,000 cash. The acquisition-date fair value of the noncontrolling interest was $60,000. At January 1, 2011, Star’s net assets had a total carrying amount of $420,000. Equipment (8-year remaining life) was undervalued on Star’s financial records by $80,000. Any remaining excess fair value over book value was attributed to a customer list developed by Star (4-year remaining life), but not recorded on its books. Star recorded income of $70,000 in 2011 and $80,000 in 2012. Each year since the acquisition, Star has paid a $20,000 dividend. At January 1, 2013, Pride’s retained earnings show a $250,000 balance.
Selected account balances for the two companies from their separate operations were as follows:
2013 Revenues . . . . . . . . . . . . . . . $498,000 $285,000
2013 Expenses . . . . . . . . . . . . . . . 350,000 195,000