Apologies first for this damn basic problem, but just not clicking in my head :(. Company A acquired a 50% stake in Company T on January 1, 2003 by paying T’s shareholders $100,000 in cash. Pre-acquisition balance sheets for the two firms are presented below: Balance Sheet Company A Company T Current assets $400,000 $60,000 Fixed assets 600,000 100,000 Total $1,000,000 $160,000 Current liabilities 50,000 30,000 Common stock 350,000 60,000 Retained earnings 600,000 70,000 Total $1,000,000 $160,000 ======================= Post acquisition balance sheet, what is the minority interest in Company A’s balance sheet. i got this far. Current Assets = 400,000+60,000-100,000 = 360,000 Fixed Assets = 600,000 + 100,000 = 700,000 total Assets = 1,060,000 Current L = 50,000 + 30,000 = 80,000 Stock = 350,000 RE = 600,000 Minority Interest = .5 x (60,000 + 70,000)= 65000 Obviously its wrong because it doesnt add up to 1060,000 on right side of bs. please help me. i think i am going crazy 
Think you are missing accounting for the fair value of T which is more than book value Under IFRS (T is valued at fair value) Note A payed 100 for 50% of T. So Fair value of T is 200 ie. 70 more than net assets. So in conolidation you have to take the fair value TA= 1160 (A +T assets) - 100(cost) + 70 extra value = 1130 TL=80(TL) + 950 (S+RE) + .5 *(200) = 1130 Under GAAP (T is valued at fair value for the 50 % A owns) TA= 1160 - 100(cost) + 50%*70= 1095 TL=80(TL) + 950 (S+RE) + .5*(130) = 1095
thadim. no. this question is from qbank. The question was what was the post acquisition value of assets under consolidation method and equity method. the answer for the consolidation method is 1,060,000. i got that right. but while reviewing the problem, i wanted to do the liability side and its not matching up to 1,060,000
What is q#?
#89480
Looks to me the answer is wrong and that is why it is not matching. One has to account for the extra cost A paid. Since 50% of 130 is 65, but A paid 100. Is there a errata for Qbank?
One has to either account for the fair value or assume the assume the percenatge is higher than 50%. Now 100/130=77%. If one assume A bought 77% (instead of 50%) , of T (so no goodwill or above bargain price) then it will match for consolidation method. 80+950+0.23*130(minority interest)=1060 I am pretty positive Schweser is wrong in this case. On the equity method part of it, the answer is fine