Pie Corporation acquired 80 percent of Slice Company’s common stock on December 31, 20×5, at underlying book value. The book values and fair values…

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Pie Corporation acquired 80 percent of Slice Company’s common stock on December 31, 20×5, at underlying book value. The book values and fair values of Slice’s assets and liabilities were equal, and the fair value of the noncontrolling interest was equal to 20 percent ofthe total book value of Slice. Slice provided the following trial balance data at December 31, 20×5: Debit Credit Cash $ 28,200Accounts Receivable 65,350Inventory 89,400Buildings and Equipment (net) 205,000Cost of Goods Sold 106,000Depreciation Expense 23,850other Operating Expenses 30,540Dividends Declared 14,800Accounts Payable $ 32,840Notes Payable 119,000Common Stock 88,800Retained Earnings 131,500Sales 191,000Total $563,140 $563,140 Required: a. How much did Pie pay to purchase its shares of Slice? (Round your answer to nearest whole dollar amount.)

 

To determine how much Pie Corporation paid to purchase its shares of Slice Company, we need to calculate the total book value of Slice’s equity.

From the given information, we know that Pie acquired 80% of Slice’s common stock and that the fair value of the noncontrolling interest is equal to 20% of the total book value of Slice.

Let’s calculate the total book value of Slice’s equity:

Total Equity = Common Stock + Retained Earnings

Total Equity = $88,800 + $131,500
Total Equity = $220,300

Now, we need to determine the fair value of Slice’s equity. Since the fair values of Slice’s assets and liabilities were equal, the fair value of Slice’s equity is equal to its total book value.

Fair Value of Slice’s Equity = Total Equity
Fair Value of Slice’s Equity = $220,300

Next, we need to determine the purchase price of Pie’s shares of Slice. Since Pie acquired 80% of Slice’s common stock, it paid 80% of the fair value of Slice’s equity.

Purchase Price = 80% × Fair Value of Slice’s Equity

Purchase Price = 0.80 × $220,300
Purchase Price = $176,240

Therefore, Pie Corporation paid $176,240 to purchase its shares of Slice Company.