Questionon 1st january 2012 john doeby enterprises acquired

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Reference no: EM13348628

Question:

On 1st January, 2012, John Doeby Enterprises acquired a 55% interest in BMI, Inc. (BMI). Doeby paid for the transaction with $3 million cash and 500,000 shares of Doeby common stock (par value $1.00 per share). At the time of the acquisition, Doeby's and BMI's book values were:

                                                                                               Doeby                     BMI

Common Stock                                                                  2,400,000            6,000,000

Additional Paid-In Capital in Excess of Par                       12,050,000         10,870,000

Retained Earnings                                                            2,500,000               100,000

                                                                                            Book Value                Fair Value

Land                                                                                    1,700,000                 2,550,000

Buildings, net (7-years remaining life)                                 2,700,000                  3,400,000

Equipment, net (5-years remaining life)                               3,700,000                  3,300,000

On 1st January, 2012 Doeby common stock had a market value of $14.90 per share and there was no control premium in this transaction. Any consideration transferred over book value is assigned to goodwill. BMI had the following balances on 1st January, 2012.

For internal reporting purposes, Doeby employs the equity method to account for this investment.

REQUIRED:

(1) In good form, purpose a schedule showing the determination of goodwill, and the allocation amounts and amortization, related to Doeby's 1st January, 2012 transaction.

(2) Consider that BMI's pre-consolidation balances illustrate subsidiary net income of $625,000 and dividends declared and paid of $130,000, in good form, purpose the consolidation elimination entries needed at December 31, 2012.

(3) Suppose that on January 1, 2013, Doeby pays $2,000,000 to acquire another 10% of BMI's outstanding voting stock, in good form, purpose the entry Doeby will record to reflect this additional acquisition.

(4) In good form, purpose a schedule showing the computation of the noncontrolling interest in BMI immediately after Doeby's January 1, 2013 acquisition.

Reference no: EM13348628

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