Final answer:
The balance assigned to the noncontrolling interest in the consolidated balance sheet given the acquisition of 75% of Scissor Corporation by Paper Company, with reported goodwill, is $25,000.
Step-by-step explanation:
The balance that will be assigned to the noncontrolling interest in the consolidated balance sheet when Paper Company pays $90,000 to acquire 75 percent ownership in Scissor Corporation with assets of $150,000 and liabilities of $50,000, and reports goodwill of $20,000, can be calculated as follows:
- First, we determine the total purchased price of Scissor Corporation implied by the 75% acquisition: $90,000 / 0.75 = $120,000.
- Then, we subtract the fair value of assets acquired ($150,000) from the fair value of liabilities ($50,000) to get the net fair value of Scissor: $150,000 - $50,000 = $100,000.
- Next, subtract the implied total purchase price from the net fair value, $100,000 - $120,000 = -$20,000 (negative because the purchase price is higher).
- Lastly, we add the reported goodwill of $20,000 to the negative balance: -$20,000 + $20,000 = $0. The entire purchase price is accounted for, meaning no excess and no noncontrolling interest is recognized.
In a situation where no excess is left after accounting for goodwill, the noncontrolling interest is the fair value of the non-owned portion of the company. Since 25% is not owned, we calculate 25% of the net fair value of Scissor Corporation: 0.25 x $100,000 = $25,000.
Therefore, the noncontrolling interest balance recorded would be $25,000.