 Hello and welcome to the session in which we would look at the step acquisition and in this scenario we're going to be going from a controlling interest to a controlling interest from control to control. What does that mean? It means we already own more than 50 percent of the company for example we own already 60 percent and we're going to increase our ownership from 60 to 70 percent. So we are within control because as soon as you own more than 50 percent you have control. In the prior session we looked at non-control when we had non-control when we were in this area here less than 50 percent and we jump into control. So in this scenario it's going to be controlled to control. This topic is covered in an advanced accounting course. It's also covered although briefly on the CBA exam you need to know the rules. I'm going to go a little bit deeper than the rules. I'm going to show you with numbers how this work but you need to know how it works. So whether you are an accounting student or a CPA candidate I strongly suggest you take a look at my website farhatlectures.com. I don't replace your CPA review course. I'm a useful addition supplemental material to your CPA review course. My material can help you understand your CPA review course better which in turn will help you pass the exam. Your risk is one month of subscription. Your potential gain is passing the exam. If not for anything take a look at my website to find out how well or not well your university doing on the CPA exam. This is a list of all of my course catalog. My CPA supplemental resources are aligned with your Becker, Roger, Wiley, Gleam so it's very easy to follow back and forth. I do have I give you access to all the AI CPA previously released questions. If you have not connected with me on LinkedIn please do so. Take a look at my LinkedIn recommendation like this recording. Connect with me on Instagram, Facebook, Twitter, and Reddit. So in this session we're going to be explaining going from controlling interest to more control. So at this point we already we already know that control already exists. It means we have Goodwill and NCI that already existed from the prior transaction. So what's going to happen then if you already have control and you're adding more to it. So what you're technically doing is you're reducing the non-controlling interest. What does that mean? Let me show you on a graph. If you are let's assume we're started at 60% and we're going to increase it to 80%. So notice the 60% let's call it the majority interest. This is this green line is the majority. There's no such thing as the majority but just to kind of get the point that we are in control and this portion here is the non-controlling or the minority interest. All we're doing is we are taking away a portion of the minority interest. That's exactly what we are doing. We're buying from the minority interest. That's that's who own the remainder the minority interest. So simply put we're going to be reducing the NCI, reducing the NCI. We're buying from them their interest. We're buying them their shares. At this point when this happened we don't revalue assets and liabilities. Remember that we don't because that valuation occurred when we had the initial control not when we increase our control. So it happens when we have the initial control. The best way to illustrate this is to actually work an actual example. On January 1st 2024 Adam obtained 70% of Ryan company by paying $350,000 in cash. Well now we need to find out what's implied fair value. The fair value is half a million, 350 divided by 70. The book value of Ryan company equal to the fair value equal to $400,000 on that date. Therefore we paid $100,000 more. We're going to assume the whole amount is goodwill. Therefore we established goodwill at $100,000. Now a year later we decided to buy more shares of Ryan's company. Remember we own 70% we own 70% and now we're going to increase our ownership a year later. A year later the book value is $420,000 and Adam decided to buy an additional 20% go from 70 to 90% additional 20% by paying $95,000. So here we go. The valuation basis was established January 1st so we don't go back and revalue any assets. So all what's going to happen here now technically what's happening is it's a transaction and the combined entities own stocks. So it's the same company. Simply put we're going to be reducing NCI and increasing additional paid in capital. There is no gain and no loss. So let's take a look at the difference between the fair value, consideration transfer and the underlying subsidiaries valuation subsidiaries valuation. Let's take a look at it. We paid $95,000 for 20%. The non-controlling interest we purchased 20% of $420 because this is the book value as of $1125. So we took away $84,000 of their book value and we took away 20% of their goodwill. We took away from them $104,000. We paid only $95,000. The difference is $9,000. Simply put we paid less. We paid less for their interest because their interest is $104,000 between goodwill and book value. We only paid $95,000. So simply put the general entry that we will make with is we're going to debit investment in Ryan for $104,000. What is that $104,000 coming from? Well, $95,000 is what we paid and the remainder which is $9,000 is coming from NCI. It's transferred from NCI. Then we're going to credit cash and then a little credit cash and the difference is paid in capital. Again, we don't have a gain. We don't have a loss. Technically what we did is we reduced NCI and we increased our investment by that amount. So simply put the majority owners acquire the portion of their firm at $9,000 less than the consolidated book value. So get a small bargain here. From a worksheet perspective, again the $104,000 is an increase of the investment by simply reducing. We're going to be reducing NCI if we complete the worksheet which is beyond the scope of our purpose but this is exactly why because you might be asking why am I paying $95,000 and getting the investment is $104,000 because when you complete the consolidation worksheet you will have to reduce NCI and it's increased against the investment and that amount is $9,000. So this is basically what happened. At the end of this recording I'm going to remind you whether you are an accounting student or a CPA candidate. To take a look at my website farhatlectures.com I do not replace your CPA review course. Keep it. You need it. I am a supplemental tool. I am an adjunct. I'm helpful to that course. Study hard, invest in yourself. The CPA is worth it and stay safe.