#8) On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of
ID: 2542767 • Letter: #
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#8) On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $45,948. Calvin Co. has one recorded asset, a specialized production machine with a book value of $14,900 and no liabilities. The fair value of the machine is $65,900, 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 $76,580.
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.
Please show calculations; thanks.
Revenues $ 64,800 Machine $ 13,410 Common stock $ 10,000 Expenses 33,900 Other assets 22,490 Retained earnings 25,900 Net income $ 30,900 Total assets $ 35,900 Total equity $ 35,900 Dividends paid $ 5,000Explanation / Answer
Fair value of Calvin's (given) $76,850 Calvin's Book value -$14,900 Fair value in excess of book value $61,950 Allocated Amortization To machine ($65900 - 14900)=$51,000 /10 years $51,000 $5,100 Per Year To process trade secret =( $54,640 - $51000)/4 years $10,950 $2,737.5 Per Year Total $61,950 $7,837.5 Per Year a) Non-controlling interest in subsidiary Income Net income allocation 40% x ($64,800 revenues - $33,900+7837.5 expenses) $9,225 b)Total Non controlling Interest Beginning balance ($76,850 x 40%) $30,740 Net income allocation 40% x ($64,800 revenues - $33,900+7837.5 expenses) $9,225 Dividend reduction (40% x ? $5,000) -$2,000 Total Non controlling Interest $37,965 c) Calvin's Machine (net) Machine = ($13,410 book value + $51000 excess allocation - $5,100 excess depreciation for one year) $59,310 d) Process trade secret (net) Process trade secret (net) = 10950 -2737.5 $8,212.5
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