McGuire Company Acquired 90 Percent of Hogan Company on January

question 83

Multiple Choice

McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: $$\begin{array} { l c c } & \text { Book Value } & \text { Fair Value } \\\text { Buildings (10-year life) } & \$ 10,000 & \$ 8,000 \\\text { Equipment (4-year life) } & 14,000 & 18,000 \\\text { Land } & 5,000 & 12,000\end{array}$$ Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years. In consolidation at December 31, 2014, what net adjustment is necessary for Hogan's Patent account?

• A)$5,600.
• B)$8,800.
• C)$7,000.
• D)$7,700.
• E)No adjustment is necessary.

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Definitions:

Interest Payable

The amount of interest expense that has been incurred but not yet paid by a company during a specific period.