On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Cal
ID: 2469710 • Letter: O
Question
On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $51,816. Calvin Co. has one recorded asset, a specialized production machine with a book value of $13,500 and no liabilities. The fair value of the machine is $73,000, and the remaining useful life is estimated to be 10 years. Any remaining excess fair value is attributable to an unrecorded process trade secret with an estimated future life of 4 years. Calvin’s total acquisition date fair value is $86,360.
Determine the amounts that Beckman should report in its year-end consolidated financial statements for noncontrolling interest in subsidiary income, total noncontrolling interest, Calvin’s machine (net of accumulated depreciation), and the process trade secret. (Input all amounts as positive values.)
At the end of the year, Calvin reports the following in its financial statements:Explanation / Answer
I have calcualated it by two valuation concept parent company Concept Purchase price $51,816 Book Value (60%) 8100 Purchase price in excess of book value $43,716 To Machine (73000-13500)*60% 35700 divided by 10 3570 per year To Process Trade secret $8,016 /4 $2,004 per year Non-controlling Interest in subsidary Income 40% *42150 16860 Total Non controlling Interest Beginning balance (10000*40%) 4000 Income 16860 Less; Dividend received (5000*40%) -2000 End of year non controlling interest 18860 Calvin machine Beginning balance 13500 Less: depreciation -1350 Beckhams excess value of machine $35,700 Beckham excess depreciation -3570 Machine balance at the year end 44280 Process secret 8016-2004 $6,012 2) Economic Unit concept Fair value of the company 51816/60% 86360 Less: book value 13500 Fair vlaue in excess of book value 72860 To Machine (73000-13500) 59500 /10 5950 To process trade secret 13360 /4 1336 Non-controlling Interest in subsidary Income 40% *(76350-34200-5950-1336) 13946 Total Non controlling Interest Beginning balance (86360*40%) 34544 Income 13946 Less; Dividend received (5000*40%) -2000 End of year non controlling interest 46489.6 Machine Calvin machine Beginning balance 13500 Less: depreciation -1350 Beckhams excess value of machine $59,500 Beckham excess depreciation -5950 Machine balance at the year end 65700 Process secret 13360-1336) $12,024