On January 1, 2012, John Doeby Enterprises acquired a 55% interest in BMI, Inc. (BMI). Doeby paid for the transaction with $3 million cash and 500,000 shares of Doeby common stock (par value $1.00 per share). At the time of the acquisition, Doeby's and BMI's book values were:
| |
Doeby
|
BMI
|
|
Common Stock
|
2,400,000
|
6,000,000
|
|
Additional Paid-In Capital in Excess of Par
|
12,050,000
|
10,870,000
|
|
Retained Earnings
|
2,500,000
|
100,000
|
| |
Book Value
|
Fair Value
|
|
Land
|
1,700,000
|
2,550,000
|
|
Buildings, net (7-years remaining life)
|
2,700,000
|
3,400,000
|
|
Equipment, net (5-years remaining life)
|
3,700,000
|
3,300,000
|
On January 1, 2012 Doeby common stock had a market value of $14.90 per share and there was no control premium in this transaction. Any consideration transferred over book value is assigned to goodwill. BMI had the following balances on January 1, 2012.
For internal reporting purposes, Doeby employs the equity method to account for this investment.
REQUIRED:
(1) In good form, prepare a schedule showing the determination of goodwill, and the amortization and allocation amounts, related to Doeby's January 1, 2012 transaction.
(2) Assuming that BMI's pre-consolidation balances show subsidiary net income of $625,000 and dividends declared and paid of $130,000, in good form, prepare the consolidation elimination entries needed at December 31, 2012.
(3) Assume that on January 1, 2013, Doeby pays $2,000,000 to acquire another 10% of BMI's outstanding voting stock, in good form, prepare the entry Doeby will record to reflect this additional acquisition.
(4) In good form, prepare a schedule showing the computation of the noncontrolling interest in BMI immediately after Doeby's January 1, 2013 acquisition.