On January 1, 2013, Nichols Company Acquired 80% of Smith

question 20

Multiple Choice

On January 1, 2013, 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. Any excess acquisition-date fair value over book value is considered goodwill. The capital structure of Smith immediately prior to the acquisition is: $\begin{array}{l}\text { Common stock, } \$ 10 \text { par value }(50,000 \text { shares outstanding }) &\$500,000\\\text { Preferred stock, } 6 \% \text { cumulative, } \$ 100 \text { par value, }\\3,000 \text { shares outstanding } & 300,000 \\\text { Additional paid in capital } & 200,000 \\\text { Retained earnings } & 500,000\\\text { Total stockholders' equity }&\$1,500,000\end{array}$ Compute the non-controlling interest in Smith at date of acquisition.

• A)$486,000.
• B)$480,000.
• C)$300,000.
• D)$150,000.
• E)$120,000.

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Definitions:

Self-fulfilling

A prediction or expectation that causes itself to become true simply because the prediction or expectation was made.

Psychological Disorder

A mental disorder or mental illness characterized by significant disturbance in an individual's thoughts, feelings, or behavior, which deviates from cultural norms.

Violent Behavior

Actions that involve physical force intended to hurt, damage, or kill someone or something, often a symptom of underlying psychological issues or societal problems.

Predictor

An element or variable that can be used to forecast or anticipate the outcome or future trends of something.