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4-14: Noncontrolling interest: David Company acquired 60 per

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David Company acquired 60 percent of Mark Company for $300,000 when Mark's book value was $400,000. On that date, Mark had equipment (with a 10-year life) that was undervalued in the financial records by $60,000. Also, buildings (with a 20-year life) were undervalued by $40,000. Two years later, the following figures are reported by these two companies (stockholders' equity accounts have been omitted).

Mark
David Mark Company
company company Fair Market
Book Value Book Value value
Current assets . . . . . . . . . . . . . . . . $ 620,000 300,000 320,000
Equipment . . . . . . . . . . . . . . . . . . . 260,000 200,000 280,000
Buildings . . . . . . . . . . . . . . . . . . . . . 410,000 150,000 150,000
Liabilities . . . . . . . . . . . . . . . . . . . . . (390000) (120,000) (120,000)
Revenues . . . . . . . . . . . . . . . . . . . . (900,000) (400,000)
Expenses . . . . . . . . . . . . . . . . . . . . . 500,000 300,000
Investment income . . . . . . . . . . . . . not given

14. What is the consolidated balance of the Equipment account?
a. $488,800
b. $498,400
c. $500,800
d. $508,000

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Solution Summary

Answers a conceptual question on non-controlling interest.

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Total book value of equipment = 260,000+200,000=460,000
Excess purchase price ...

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