Primer Company Acquired an 80% Interest in SealCoat Company on January

question 7

Multiple Choice

Primer Company acquired an 80% interest in SealCoat Company on January 1, 2016, for $450,000 cash when SealCoat Company had common stock of $250,000 and retained earnings of $250,000. All excess was attributable to plant assets with a 10-year life. SealCoat Company made $50,000 in 2016 and paid no dividends. Primer Company's separate income in 2016 was $625,000. The controlling interest in consolidated net income for 2016 is:

• A) $675,000.
• B) $665,000.
• C) $660,000.
• D) $625,000.

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Definitions:

Strategic Fit

Alignment between an organization's strategies, capabilities, and the external environment, aiming to achieve competitive advantage.

Discounted Cash Flow

A valuation method used to estimate the attractiveness of an investment opportunity, accounting for the time value of money.

Efficiency Improvement

The process of optimizing operations to increase output, enhance quality, or reduce costs without compromising the end product or service.

Merger

The complete absorption of one company by another, where the acquiring firm retains its identity and the acquired firm ceases to exist as a separate entity.