On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Cal
ID: 2405810 • Letter: O
Question
On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $48,960. Calvin Co. has one recorded asset, a specialized production machine with a book value of $19,900 and no liabilities. The fair value of the machine is $68,400, 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 $81,600.
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 $ 58,050 Machine $ 17,910 Common stock $ 10,000 Expenses 22,050 Other assets 23,090 Retained earnings 31,000 Net income $ 36,000 Total assets $ 41,000 Total equity $ 41,000 Dividends paid $ 5,000Explanation / Answer
Fair Value of the company 81600 Book value -19900 Fair Value in excess of Book value 61700 To machine(68400-19900) 48500 To process trade secret 13200 Excess depreciation to machine per year (48500/10) 4850 Excess amortization to process trade secret per year(13200/4) 3300 Non controlling interest in subsidiary income 40%*(58050-22050-4850-3300) 11140 End of year noncontrolling interest Beginning Balance(81600*40%) 32640 Income allocation 11140 Dividend reduction(40%*5000) -2000 End of year noncontrolling interest 41780 Machine(net) = (17910+48500-4850) 61560 Process trade secret(13200-3300) 9900
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