On January 1 2012 Pierson Corporation exchanged 1 710

000 cash for #8086

On January 1, 2012, Pierson Corporation exchanged $1,710,000 cash for 90 percent of the
outstanding voting stock of Steele Company. The consideration transferred by Pierson provided
a reasonable basis for assessing the total January 1, 2012, fair value of Steele Company.At the
acquisition date, Steele reported the following owners' equity amounts in its balance
sheet:Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $400,000Additional paid-in
capital . . . . . . . . . . . . . . . . . . . . . . . . . . .60,000Retained earnings . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .265,000In determining its acquisition offer, Pierson noted that the values for Steele's
recorded assets and liabilities approximated their fair values. Pierson also observed that Steele
had developed internally a customer base with an assessed fair value of $800,000 that was not
reflected on Steele's books. Pierson expected both cost and revenue synergies from the
combination. At the acquisition date, Pierson prepared the following fair-value allocation
schedule:Fair value of Steele Company . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,900,000Book
value of Steele Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 725,000Excess fair value . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,175,000 to customer base (10-year remaining life) . .
. . . . . . . . . . . . . . . . . . 800,000 to goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 375,000At December 31, 2013, the two companies report the following balances:a. Determine
the consolidated balances for this business combination as of December 31, 2013.b. If instead
the noncontrolling interest's acquisition-date fair value is assessed at $152,500, what changes
would be evident in the consolidated statements?View Solution:
On January 1 2012 Pierson Corporation exchanged 1 710 000 cash for

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