| Course | ACC 405 Advanced Accounting |
|---|---|
| Module | Module 2 |
| Paper type | undergraduate business combination assignment under the acquisition method |
| Length | About 1,030 words, 6 pages |
| Format | APA 7 student paper |
| School | Southern New Hampshire University |
| Program | BS Accounting |
| Updated | October 2026 |
Free sample paper for ACC 405 Module 2
Eighty Percent of a Sugarhouse: Applying the Acquisition Method, Measuring Goodwill and Valuing the Noncontrolling Interest
[Student Name]
Southern New Hampshire University
ACC 405: Advanced Accounting
Module Two Assignment
[Instructor Name]
[Date]
The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.
Eighty Percent of a Sugarhouse: Applying the Acquisition Method, Measuring Goodwill and Valuing the Noncontrolling Interest
Introduction
On January 1, a composite New Hampshire maple products company acquired 80 percent of the voting stock of a Vermont sugarhouse for $4,800,000 in cash. The sugarhouse taps about 30,000 maples on its own land, boils and bottles syrup and runs a farm store with a strong wholesale list of inns and specialty grocers. The remaining 20 percent stays with the founding family. Because the parent gains control, the transaction is a business combination accounted for under the acquisition method (Financial Accounting Standards Board, 2007). This assignment measures each element at the acquisition date and records the entries.
Consideration and the Noncontrolling Interest
Consideration transferred is the $4,800,000 paid in cash. The noncontrolling interest must be measured at its own fair value. An independent appraiser valued the family's 20 percent at $1,150,000, based on recent sales of minority interests in similar farm businesses. That is less than 20 percent of the parent's implied price for 100 percent, $6,000,000, because the parent paid extra for the right to run the business, a right the family's remaining shares do not carry. The total value of the sugarhouse at the acquisition date is therefore $5,950,000.
Legal, appraisal and due diligence fees of $85,000 are not part of consideration. They are expensed in the period incurred, because they are payments for services rather than for the business (Hoyle et al., 2021).
Identifiable Net Assets at Fair Value
The sugarhouse's book equity at the acquisition date was $3,200,000, consisting of $500,000 of common stock and $2,700,000 of retained earnings. Its assets were recorded at historical cost, so several were adjusted to fair value, and two intangible assets not on its books were recognized.
Table 1. Fair Value of Identifiable Net Assets
| Item | Book value adjustment | Basis |
|---|---|---|
| Book value of net assets | $3,200,000 | Sugarhouse balance sheet |
| Land, including the sugarbush | 600,000 | Appraisal of 220 acres of producing maple forest |
| Buildings and evaporators | 350,000 | Replacement cost less depreciation; 10-year remaining life |
| Syrup inventory | 60,000 | Expected wholesale price, minus selling cost and a fair profit for the seller's effort |
| Customer relationships | 400,000 | Wholesale accounts with inns and grocers; 5-year life |
| Trade name | 250,000 | Well-known Vermont label; indefinite life |
| Fair value of identifiable net assets | $4,860,000 |
The customer relationships qualify for separate recognition because they arise from written supply agreements, a contractual basis, and could be sold with the agreements. The trade name is a registered mark that could be licensed, so it is separable. Both would otherwise be buried in goodwill.
Goodwill and Its Allocation
Table 2. Goodwill
| Item | Total | Parent, 80% | Noncontrolling, 20% |
|---|---|---|---|
| Fair value of consideration and noncontrolling interest | $5,950,000 | $4,800,000 | $1,150,000 |
| Share of identifiable net assets at fair value | 4,860,000 | 3,888,000 | 972,000 |
| Goodwill | $1,090,000 | $912,000 | $178,000 |
Goodwill of $1,090,000 represents value not attributable to identifiable assets: the assembled workforce of experienced sugarmakers, the farm store's location on a busy scenic route and expected savings from combining bottling and distribution with the parent. Goodwill is not amortized unless a private company elects the simplified alternative that allows amortization over ten years or less; this company has not made that election, so its goodwill is tested for impairment at least annually. Because the noncontrolling interest was measured at fair value, the parent's share of goodwill, $912,000, is larger per share than the noncontrolling share, $178,000, reflecting the control premium.
Why Not Use Book Value?
It might seem simpler to combine the sugarhouse at its book values, as companies did under the old pooling method. The acquisition method rejects that because the parent paid for what the business is worth today, not what its assets cost decades ago. The sugarbush land was bought in the 1970s for a fraction of its current value, and the customer list and trade name never appeared on the sugarhouse's books because they were built rather than bought. Recording them at fair value shows users what the parent actually acquired and makes later results comparable with companies that grew by building rather than buying. It also limits goodwill to the value that truly cannot be attached to anything specific, so that impairment testing has a clearer target.
Entries at the Acquisition Date
On its own books, the parent debits Investment in Sugarhouse for $4,800,000 and credits Cash, and debits Professional Fees Expense for $85,000. In the January 1 worksheet, the investment and the noncontrolling interest are eliminated against the sugarhouse's equity, and the excess of fair value over book value is assigned to the specific accounts.
Table 3. Acquisition-Date Worksheet Eliminations
| Entry | Debit | Credit |
|---|---|---|
| S: eliminate subsidiary equity | Common stock $500,000; Retained earnings $2,700,000 | Investment $2,560,000; Noncontrolling interest $640,000 |
| A: allocate excess fair value | Land $600,000; Buildings $350,000; Inventory $60,000; Customer relationships $400,000; Trade name $250,000; Goodwill $1,090,000 | Investment $2,240,000; Noncontrolling interest $510,000 |
After both entries, the investment account is fully eliminated and the noncontrolling interest appears in consolidated equity at its $1,150,000 fair value.
What the Allocation Means for Later Years
The allocation is not a one-time exercise. Each adjustment has a future consequence. The $60,000 inventory step-up becomes cost of goods sold when the syrup is sold, almost certainly in the first year. The $350,000 for buildings and evaporators is depreciated over ten years, $35,000 a year, and the customer relationships over five, $80,000 a year. Land, the trade name and goodwill are not amortized. In the first year, therefore, consolidated income will be $175,000 lower than the sum of the two companies' own results, and Project One will carry these amounts into the worksheet. Shalev et al. (2013) found that managers whose bonuses depend on earnings tend to allocate more of the purchase price to goodwill, which is not amortized, and less to assets that reduce future income. A careful, documented allocation like this one is the auditor's protection against that pressure.
Conclusion
The parent's $4,800,000 for 80 percent and the $1,150,000 fair value of the remaining 20 percent value the sugarhouse at $5,950,000. Identifiable net assets are $4,860,000 at fair value, including $650,000 of new intangibles, and goodwill is $1,090,000, shared $912,000 to the parent and $178,000 to the noncontrolling interest. The $85,000 of acquisition costs are expensed, and the allocation schedule sets up $175,000 of additional expense in the first year.
References
Financial Accounting Standards Board. (2007). Business combinations (Statement of Financial Accounting Standards No. 141, revised). Author.
Hoyle, J. B., Schaefer, T. F., & Doupnik, T. S. (2021). Advanced accounting (14th ed.). McGraw Hill.
Shalev, R., Zhang, I. X., & Zhang, Y. (2013). CEO compensation and fair value accounting: Evidence from purchase price allocation. Journal of Accounting Research, 51(4), 819-854. https://doi.org/10.1111/1475-679X.12015
What the ACC 405 Module 2 instructions ask for
The Module Two assignment in ACC 405 usually presents an acquisition of all or most of another company and asks you to apply the acquisition method. Expect to measure the consideration transferred, the fair value of any noncontrolling interest, the fair values of identifiable assets acquired and liabilities assumed, including intangible assets not on the target's books, and goodwill or a bargain purchase gain. You will often record the parent's entry, prepare an excess allocation schedule and present the acquisition-date consolidated balance sheet or worksheet. Explain how each fair value was determined, how acquisition costs are treated and how goodwill is shared between the parent and the noncontrolling interest.
How this ACC 405 Module 2 business combination assignment example is built
The sample analyzes the purchase of 80 percent of a Vermont sugarhouse for $4,800,000. The remaining 20 percent is valued at $1,150,000, less than a pro rata share because a minority stake lacks control, so the business as a whole is valued at $5,950,000. The sugarhouse's book equity is $3,200,000; fair value adjustments add $600,000 for its sugarbush land, $350,000 for evaporators and buildings and $60,000 for syrup inventory, and new intangibles add $400,000 for customer relationships and $250,000 for a trade name. Identifiable net assets are $4,860,000, so goodwill is $1,090,000, of which $912,000 belongs to the parent and $178,000 to the noncontrolling interest. Acquisition costs of $85,000 are expensed.
Where the ACC 405 Module 2 rubric puts the points
Rubrics for the ACC 405 business combination assignment typically score measurement of consideration, the noncontrolling interest, fair value adjustments, identifiable intangibles, goodwill and its allocation, the treatment of acquisition costs and the journal entries or worksheet. Top papers measure the noncontrolling interest at fair value, recognize intangible assets that meet the separability or contractual-legal criteria, expense acquisition costs and allocate goodwill correctly between the parent and the noncontrolling interest. Graders reward explaining why each fair value differs from book value and why each new intangible meets the recognition test. Common deductions include capitalizing acquisition costs, computing goodwill only on the parent's share and ignoring intangibles not recorded by the target.
ACC 405 Module 2 help: the mistakes that cost points
The usual mistakes in this assignment are computing goodwill as the price paid minus the parent's share of book value, ignoring fair value adjustments, treating legal and advisory fees as part of the purchase price and leaving the noncontrolling interest at a proportionate share of book value. Another common gap is recognizing goodwill for something that should be a separate intangible, such as a customer list. If your problem includes contingent consideration, a bargain purchase or a previously held interest, the method extends to those features and we can work them from your data. Build the allocation schedule first; every later consolidation entry draws on it, and an error there repeats in every year that follows.
Get ACC 405 Module 2 written to your instructions
Send the ACC 405 Module 2 problem and instructions. The paper will measure consideration, fair values, the noncontrolling interest and goodwill, allocate the excess in a schedule and record the acquisition-date entries with explanations. Delivery is usually two days out, with no fee on your first request. The paper above is an original model document written by our desk, not a submitted student paper and not an official Southern New Hampshire University document.
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ACC 405 Module 2 questions, answered
Where can I find a free ACC 405 Module 2 business combination sample?
This page holds a full ACC 405 Module 2 assignment applying the acquisition method to an 80 percent purchase, with goodwill and noncontrolling interest.
How is goodwill calculated under the acquisition method?
Consideration transferred plus the fair value of any noncontrolling interest, minus the fair value of identifiable net assets acquired.
Are acquisition costs part of goodwill?
No. Legal, accounting and advisory fees are expensed as incurred. Costs to issue debt or equity are deducted from the related liability or equity.
When is an intangible asset recognized separately from goodwill?
When it arises from contractual or legal rights or is separable, meaning it could be sold, licensed or exchanged on its own.
Why might the noncontrolling interest be worth less per share than the parent paid?
Because the parent's price includes a control premium. A minority stake lacks control, so its fair value per share is often lower.