Question

On April 1, Pujols, Inc., exchanges $430,000 fair-value consideration for 70 percent of the outstanding stock of Ramirez Corporation. The remaining 30 percent of the outstanding shares con- tinued to trade at a collective fair value of $165,000. Ramirez's identifiable assets and liabilities each had book values that equaled their fair values on April 1 for a net total of $500,000. Dur- ing the remainder of the year, Ramirez generates revenues of $600,000 and expenses of $360,000 and declared no dividends. On a December 31 consolidated balance sheet, what amount should be reported as noncontrolling interest?

a. $219,000
b. $237,000
c. $234,000
d. $250,500

Answer 1

To calculate the noncontrolling interest on the consolidated balance sheet, add the fair value of the noncontrolling interest shares at acquisition to their share of net income, resulting in $237,000. Therefore, the answer is $237,000, which corresponds to option (b).

Step-by-step explanation:

The calculation of noncontrolling interest on a consolidated balance sheet involves understanding the net value attributable to the minority shareholders of the acquiree. Since Pujols, Inc. acquired 70% of Ramirez Corporation, 30% remains as noncontrolling interest. To find the value of noncontrolling interest on December 31, take the value of the noncontrolling 30%, add the minority interest's share of Ramirez's net income, and exclude any dividends (which are declared to be none).

To compute this:

1. Start with the collective fair value of the noncontrolling interest at the time of acquisition: $165,000.
2. Add the noncontrolling interest's share of Ramirez Corporation's net income for the year: 30% of ($600,000 revenue - $360,000 expenses) = 30% of $240,000 = $72,000.
3. Add the two amounts to get the total noncontrolling interest value: $165,000 + $72,000 = $237,000.

Therefore, the answer is $237,000, which corresponds to option (b).