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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