Asked by
Nithya Kalepalli
on Oct 16, 2024
Verified
Parent Inc. and Sub Inc. had the following balance sheets on July 31, 2019: Parent Inc Sub Inc Sub Inc (caryying value) (carrying value) (fair value) Cash $180,000$36,000$36,000 Accounts Receivable $100,000$40,000$40,000 Inventory $60,000$24,000$27,000 Plant and Equipment (net) $200,000$80,000$93,000 Goodwill $−$8,000 Trademark $−$12,000$15,000 Total Assets $540,000$200,000 Current Liabilities $80,000$50,000$50,000 Bonds Payable $320,000$20,000$24,000 Common Shares $90,000$80,000 Retained Earnings $50,000$50,000 Total Liabilities and Equity $540,000$200,000\begin{array}{|l|r|r|r|}\hline & \text { Parent Inc } & \text { Sub Inc } & \text { Sub Inc } \\\hline & \text { (caryying value) } & \begin{array}{r}\text { (carrying } \\\text { value) }\end{array} & \text { (fair value) } \\\hline \text { Cash } & \$ 180,000 & \$ 36,000 & \$ 36,000 \\\hline \text { Accounts Receivable } & \$ 100,000 & \$ 40,000 & \$ 40,000 \\\hline \text { Inventory } & \$ 60,000 & \$ 24,000 & \$ 27,000 \\\hline \text { Plant and Equipment (net) } & \$ 200,000 & \$ 80,000 & \$ 93,000 \\\hline \text { Goodwill } & \$- & \$ 8,000 & \\\hline \text { Trademark } & \$- & \$ 12,000 & \$ 15,000 \\\hline \text { Total Assets } & \$ \mathbf{5 4 0 , 0 0 0} & \$ 200,000 & \\\hline \text { Current Liabilities } & \$ 80,000 & \$ 50,000 & \$ 50,000 \\\hline \text { Bonds Payable } & \$ 320,000 & \$ 20,000 & \$ 24,000 \\\hline \text { Common Shares } & \$ 90,000 & \$ 80,000 \\\hline \text { Retained Earnings } & \$ 50,000 & \$ 50,000 \\\hline \text { Total Liabilities and Equity } & \$ 540,000 & \$ 200,000 \\\hline\end{array} Cash Accounts Receivable Inventory Plant and Equipment (net) Goodwill Trademark Total Assets Current Liabilities Bonds Payable Common Shares Retained Earnings Total Liabilities and Equity Parent Inc (caryying value) $180,000$100,000$60,000$200,000$−$−$540,000$80,000$320,000$90,000$50,000$540,000 Sub Inc (carrying value) $36,000$40,000$24,000$80,000$8,000$12,000$200,000$50,000$20,000$80,000$50,000$200,000 Sub Inc (fair value) $36,000$40,000$27,000$93,000$15,000$50,000$24,000 Assuming that Parent Inc acquires 80% of Sub Inc on August 1, 2019 for cash of $180,000, what amount would appear in the Non-Controlling Interest (NCI) Account on the Consolidated Balance Sheet on the date of acquisition if the identifiable net assets (INA) method were used?
A) $45,000
B) $27,400
C) $26,000
D) Nil
Non-Controlling Interest (NCI)
A financial interest in a subsidiary attributed to shareholders outside of the controlling shareholder group, reflecting their share of the entity's equity that isn’t controlled by the parent company.
Identifiable Net Assets (INA) Method
is a technique used in business combinations to value the acquired company by summing the fair values of its identifiable assets and liabilities.
- Know the differences in the treatment of non-controlling interests (NCI) under different consolidation methods.
Verified Answer
CM
Learning Objectives
- Know the differences in the treatment of non-controlling interests (NCI) under different consolidation methods.