On January 1, 2014, Paloma Corporation exchanged $1,710,000 cash for 90 percent of the outstanding voting stock of San Marco Company. The consideration transferred by Paloma provided a reasonable basis for assessing the total January 1, 2014, fair value of San Marco Company. At the acquisition date, San Marco reported the following owners’ equity amounts in its balance sheet:
In determining its acquisition offer, Paloma noted that the values for San Marco’s recorded assets and liabilities approximated their fair values. Paloma also observed that San Marco had developed internally a customer base with an assessed fair value of $800,000 that was not reflected on San Marco’s books. Paloma expected both cost and revenue synergies from the combination. At the acquisition date, Paloma prepared the following fair-value allocation schedule:
At year-end, there were no intra-entity receivables or payables.
a. Determine the consolidated balances for this business combination as of December 31, 2015.
b. If instead the noncontrolling interest’s acquisition-date fair value is assessed at $167,500, what changes would be evident in the consolidated statements?
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