On July 1, 20X8, Fair Logic Corporation Acquires 75 Percent

question 29

Multiple Choice

On July 1, 20X8, Fair Logic Corporation acquires 75 percent of Integrated Systems Inc. common stock for its underlying book value. At the time of acquisition, the fair value of the noncontrolling interest is equal to its proportionate share of book value of Integrated Systems. On January 1, 20X8 Integrated reported common stock of $100,000 and retained earnings of $130,000. For the year 20X8, Integrated reports the following items: Fair Logic uses the equity method in accounting for this investment.
Based on the preceding information, what is the fair value of the noncontrolling interest at the time of acquisition?

• A) $47,813
• B) $57,500
• C) $60,000
• D) $45,000

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Definitions:

Random Sample

A selection method where each member of a population has an equal chance of being included, used to ensure unbiased statistical results.

Negative Correlation

A connection between two variables where one variable rises as the other falls, and the reverse is also true.

Mice

Small rodents that are often found in both wild and domestic environments, sometimes considered pests.

Selection Bias

Occurs when the sample isn't representative of the population, leading to skewed or biased results.