Question

Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2016. Miller paid $856,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value of $214,000 both before and after Miller’s acquisition.

On January 1, 2016, Taylor reported a book value of $752,000 (Common Stock = $376,000; Additional Paid-In Capital = $112,800; Retained Earnings = $263,200). Several of Taylor’s buildings that had a remaining life of 20 years were undervalued by a total of $100,300.

During the next three years, Taylor reports income and declares dividends as follows:

Year	Net Income			Dividends
2016	$	87,800		$	12,500
2017		112,500			18,800
2018		125,300			25,100

Determine the appropriate answers for each of the following questions:

As of December 31, 2017, Miller’s Buildings account on its separate records has a balance of $1,004,000 and Taylor has a similar account with a $376,500 balance. What is the consolidated balance for the Buildings account? What is the balance of consolidated goodwill as of December 31, 2018?

	f. Consolidated balance g. Consolidated balance

Answer 1

                  Schedule 1—Fair Value Allocation and Excess Amortizations

                  Consideration transferred by Miller .......... $856,000

                  Noncontrolling interest fair value...............     214,000

                  Taylor’s fair value........................................... $1,070,000

                  Taylor’s book value........................................ (752,000)

                  Fair value in excess of book value ............     318,000               Annual Excess

                                                                                                                        Life     Amortizations

                  Excess fair value assigned to buildings       100,300                                                                                    20 years                                                        $5,015

                  Goodwill ........................................................... $217,700   indefinite             -0-

                        Total.............................................................                                             $5,015

f.    Using the acquisition method, the allocation will be the total difference ($100,300) between the buildings' book value and fair value. Based on a 20 year life, annual excess amortization is $5,015.

      Miller book value—buildings .................................. $1,004,000

      Taylor book value—buildings ................................        376,500

      Allocation .....................................................................        100,300

      Excess amortizations for 2016–2017 ($5,015 × 2)      (10,030)

                  Consolidated buildings account ............... $1,470,770

g.   Acquisition-date fair value allocated to goodwill

            (see schedule 1 above) ......................................     $217,700