On January 1, 2021, Nichols Company Acquired 80% of Smith

question 87

Multiple Choice

On January 1, 2021, Nichols Company acquired 80% of Smith Company's common stock and 40% of its non-voting, cumulative preferred stock. The consideration transferred by Nichols was $1,200,000 for the common and $124,000 for the preferred. There was no premium in the value of consideration transferred. Any excess acquisition-date fair value over book value is considered goodwill. The capital structure of Smith immediately prior to the acquisition is: If Smith's net income is $100,000 in the year following the acquisition,

• A) The portion allocated to the common stock (residual amount) is $92,800.
• B) $10,800 preferred stock dividend will be subtracted from net income attributed to common stock in arriving at noncontrolling interest in consolidated income.
• C) The noncontrolling interest in consolidated net income is $27,200.
• D) The preferred stock dividend will be ignored in noncontrolling interest in consolidated net income because Nichols owns the noncontrolling interest of preferred stock.
• E) The noncontrolling interest in consolidated net income is $30,800.

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Definitions:

V5 Neuron

A type of neuron that is primarily responsible for processing motion in the visual cortex of the brain.

Directions of Motion

The path along which something moves, proceeds, or is directed.

Corpus Callosum

Band of white matter containing about 200 million nerve fibers that connects the two cerebral hemispheres to provide a route for direct communication between them.

Prefrontal Association Cortex

A region of the frontal lobes involved in planning complex cognitive behaviors, personality expression, decision making, and moderating social behavior.