Question

On April 1, Pujols, Inc., exchanges $653,500 fair-value consideration for 70 percent of the outstanding stock of Ramirez Corporation. The remaining 30 percent of the outstanding shares continued to trade at a collective fair value of $230,100. Ramirez’s identifiable assets and liabilities each had book values that equaled their fair values on April 1 for a net total of $715,000. During the remainder of the year, Ramirez generates revenues of $710,000 and expenses of $453,000 and declared no dividends. On a December 31 consolidated balance sheet, what amount should be reported as noncontrolling interest?

a.$307,200.
b.$287,925.
c.$357,170.
d.$291,600

Answer 1

The noncontrolling interest amount that should be reported on the December 31 consolidated balance sheet is $307,200, which is the sum of the original fair value of noncontrolling shares ($230,100) and their share of the net income ($77,100).

Step-by-step explanation:

To determine the amount that should be reported as noncontrolling interest on a December 31 consolidated balance sheet for Ramirez Corporation, one must calculate the fair value of the noncontrolling interest (30% not owned by Pujols, Inc.) and then adjust this amount for the share of Ramirez's earnings attributable to the noncontrolling interest.

The fair value of the noncontrolling interest at the acquisition date is given as $230,100. Ramirez Corporation's net income, calculated as revenues ($710,000) minus expenses ($453,000), amounts to $257,000 for the remainder of the year. The noncontrolling interest's share of this net income is 30% of $257,000, which is $77,100. Therefore, the noncontrolling interest figure reported on the consolidated balance sheet is the original fair value plus this income attributable to the noncontrolling interest, totaling $230,100 + $77,100 = $307,200.