P3-3

Allocating excess of investment

Mark Balanced Sheet (in Thousand)

Book Value Fair Value
Cash $1.000 $1.000
Inventories $1.600 $2.000
Land $3.000 $4.000
Building-net $2.800 $2.500
Equipment-net $3.900 $4.000
Current Liabilities $900 $900
Notes Payable $1.800 $2.000
Bond Payable $2.400 $2.000
Common Stock. $10 Par $2.000
Retained Earning $5.200

Implied Fair Value Tobias AG ( 90% ) NCI ( 10 %)

Mark AG Fair Value $9.000.000 $8.100.000 $900.000

Fair Value of Net Asset $8.600.000 $7.740.000 $860.000
Goodwill $400.000 $360.000 $40.000

Mark AG Fair Value = $8.100.000 / 90% = $9.000.000

Fair Value of Net Asset = 1.000 + 2.000 + 4.000 + 2.500 + 4.000 - 900 - 2.000 - 2.000
= $8.600.000
DIstribution of Excess of Investment Fair Value

Implied Fair Value Tobias AG ( 90% ) NCI (10 % )

Fair Value Mark AG $9.000.000 $8.100.000 $900.000

Less : Book Value of

Interest aquired
Common Stock $2.000.000
Retained Earning $5.200.000
Patent $100.000
Total Equity $7.300.000 $7.300.000 $7.300.000
Interest Acquired 90% 10%
Book Value $6.570.000 $730.000
Excess of investment fair
Value over Book Value $1.700.000 $1.530.000 $170.000

E3-1

1. D. None of the Above

2. C. A purchaces 75 percent of B's Votiing Commonn Stock
3. B. Mahina Operates in multiple Business segment
4. A. Investor, affiliate, subsidiary, and non-controlling interest, respectively
5. B. it operates solely out of its headquarters