What amount of consolidated goodwill should be recognized?


Question Description:

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On January 1, Tesco Company spent a total of $4,384,000 to acquire control over Blondel Company. This price was based on paying $424,000 for 20 percent of Blondel’s preferred stock and $3,960,000 for 90 percent of its outstanding common stock. At the acquisition date, the fair value of the 10 percent noncontrolling interest in Blondel’s common stock was $440,000. The fair value of the 80 percent of Blondel’s preferred shares not owned by Tesco was $1,696,000. Blondel’s stockholders’ equity accounts at January 1 were as follows: Preferred stock—9%, $100 par value, cumulative and participating; 10,000 shares outstanding $1,000,000 Common stock—$50 par value; 40,000 shares outstanding 2,000,000 Retained earnings 3,000,000 Total stockholders’ equity $6,000,000 Tesco believes that all of Blondel’s accounts approximate their fair values within the company’s financial statements. What amount of consolidated goodwill should be recognized? a. $300,000. b. $316,000. c. $364,000. d. $520,000.

Answer

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