On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Cal
ID: 2543703 • Letter: O
Question
On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $52,152. Calvin Co. has one recorded asset, a specialized production machine with a book value of $18,500 and no liabilities. The fair value of the machine is $75,000, 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 $86,920.
At the end of the year, Calvin reports the following in its financial statements:
Determine the amounts that Beckman should report in its year-end consolidated financial statements for noncontrolling interest in subsidiary income, noncontrolling interest, Calvin’s machine (net of accumulated depreciation), and the process trade secret.
Revenues $ 54,750 Machine $ 16,650 Common stock $ 10,000 Expenses 22,200 Other assets 20,900 Retained earnings 27,550 Net income $ 32,550 Total assets $ 37,550 Total equity $ 37,550 Dividends paid $ 5,000Explanation / Answer
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Acaquisiton day fair value 86920 Less: Book Value 18500 Fair value in excess of book value 68420 Allocation: Life Amortization per year -To Machine (75000-18500) 56500 10 5650 -To Patent (68420-56500) 11920 4 2980 8630 1 Not Controlling interest in Subs 40%: Total Non Controlling Interest 40% Subs Revenue 54750 21900 Less: Subs Expense 22200 8880 Less: Excess Amortization (Working above) 8630 3452 Not Controlling interest in Subs 40%: 9568 2 Total Non Controlling Interest Working $ Beginning Balance 86920*40% 34768 Add: Allocation from Part-1 Part-1 9568 Less: Dividend 5000*40% 2000 End of year (Total Non Controlling Interest) 42336 3 Clavin's Machine (Net) Book Value Net (18500-Dep 18500/10) 16650 Add:Excess Allocation (Working on top) 56500 Less: Excess Amortization (Working on top) 5650 Clavin's Machine (Net) 67500 or Fair Value-Dep (75000-75000/10 year) 67500 4 Patent Secret 11920-2980 (From working on top) 8940