On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Cal

Question

On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $58,704. Calvin Co. has one recorded asset, a specialized production machine with a book value of $13,100 and no liabilities. The fair value of the machine is $85,600, 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 $97,840.

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.

Explanation / Answer

Total income of Calvin company =32400

Share held by others = 40 %

Non controlling interest in Calvin's income = 32400 x 40 %, = 12960

Calculating total non controlling interest

OPening fair value = 97840

Share in opening fair value = 97840 x 40 %,= 39136

Further company had profits of 32400 in current year

( by evaluating retained earninngs we find that all retained earnings are from current profit and o past profits exist) Income - dividend = retained earnings, =32400 -5000, =27400

Minorioty will have interest in profits = 12960

Less: share in dividend = 5000 x 40 %, =2000

so total non controlling interest is = 39136 +12960 - 2000, = 50096

Fair Value of Machine at beginnning = 85600

useful life = 10 years

Depreciation = Fair value / life of asset

= 85600 / 10 , =8560

Value at end = 85600 -8560 , = 77040

Fair Value of trade secret at beginning = 12240

useful life = 4 years

depreciation / amortisation = 12240 /4 ,= 3060

value at end = 12240 - 3060,= 9180

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