Parker, Inc., acquires 70 percent of Sawyer Company for $420,000. The remaining 30 percent of Sawyer’s...

Parker, Inc., acquires 70 percent of Sawyer Company for $420,000. The remaining 30 percent of Sawyer’s outstanding shares continue to trade at a collective value of $174,000. On the acquisition date, Sawyer has the following accounts:

	Book Value			Fair Value
Current assets	$	210,000		$	210,000
Land		170,000			180,000
Buildings		300,000			330,000
Liabilities		(280,000	)		(280,000	)

The buildings have a 10-year remaining life. In addition, Sawyer holds a patent worth $140,000 that has a five-year remaining life but is not recorded on its financial records. At the end of the year, the two companies report the following balances:

	Parker			Sawyer
Revenues	$	(900,000	)	$	(600,000	)
Expenses		600,000			400,000

Assume that the acquisition took place on January 1. What figures would appear in a consolidated income statement for this year?
Assume that the acquisition took place on April 1. Sawyer’s revenues and expenses occurred uniformly throughout the year. What amounts would appear in a consolidated income statement for this year?

	a. January 1	b. april 1
combined revenues
combined expenses
consolidated net income
net income attributable to noncontrolling interest
net income attributable to parker, Inc.

Expert Solution

	a. January 1	b. April 1
Combined revenues	1500000	1350000
Combined expenses	(1031000)	(923250)
Consolidated net income	469000	426750
NCI in Sawyer’s income	(50700)	(38025)
Controlling interest in consolidated net income	$418300	$388725

Part A

Acquisition-date total fair value (420000+174000)		594000
Book value of net assets (210000+170000+300000-280000)		(400000)
Fair value in excess of book value		$194000

Excess fair value assigned to		Life	Annual excess amortizations
Patent	140000	5 years	28000
Land	10000
Buildings	30000	10 years	3000
Goodwill	14000
Total	0		$31000

Combined revenues (900000+600000)	1500000
Combined expenses (600000+400000+31000)	(1031000)
Consolidated net income	469000
NCI in Sawyer’s income ([200,000 – 31,000] × 30%)	(50700)
Controlling interest in consolidated net income	$418300

Part B

Combined revenues (900000+(600000*9/12)	1350000
Combined expenses (600000+(4000009/12)+(310009/12))	(923250)
Consolidated net income	426750
NCI in Sawyer’s income (([200,000 – 31,000] × 30%)*9/12)	(38025)
Controlling interest in consolidated net income	$388725

ekkarill92 answered 2 years ago

Parker, Inc., acquires 70 percent of Sawyer Company for $420,000. The remaining 30 percent of Sawyer’s...

Parker, Inc., acquires 70 percent of Sawyer Company for $420,000. The remaining 30 percent of Sawyer’s outstanding shares continue to trade at a collective value of $174,000. On the acquisition date, Sawyer has the following accounts: Book Value Fair Value Current assets $ 210,000 $ 210,000 Land 170,000 180,000 Buildings 300,000 330,000 Liabilities (280,000 ) (280,000 ) The buildings have a 10-year remaining life. In addition, Sawyer holds a patent worth $140,000 that has a five-year remaining life but is...

Parker, Inc., acquires 70 percent of Sawyer Company for $420,000. The remaining 30 percent of Sawyer’s...

Parker, Inc., acquires 70 percent of Sawyer Company for $420,000. The remaining 30 percent of Sawyer’s outstanding shares continue to trade at a collective value of $174,000. On the acquisition date, Sawyer has the following accounts: Book Value Fair Value Current assets $ 210,000 $ 210,000 Land 170,000 180,000 Buildings 300,000 330,000 Liabilities (280,000 ) (280,000 ) The buildings have a 10-year remaining life. In addition, Sawyer holds a patent worth $140,000 that has a five-year remaining life but is...

Bolero Company holds 70 percent of the common stock of Rivera, Inc., and 30 percent of...

Bolero Company holds 70 percent of the common stock of Rivera, Inc., and 30 percent of this subsidiary’s convertible bonds. The following consolidated financial statements are for 2017 and 2018: 2017 2018 Revenues $ (965,000 ) $ (1,095,000 ) Cost of goods sold 623,000 663,000 Depreciation and amortization 113,000 146,000 Gain on sale of building 0 (43,000 ) Interest expense 53,000 53,000 Consolidated net income (176,000 ) (276,000 ) to noncontrolling interest 32,000 34,000 to parent company $ (144,000 )...

Bolero Company holds 70 percent of the common stock of Rivera, Inc., and 30 percent of...

Bolero Company holds 70 percent of the common stock of Rivera, Inc., and 30 percent of this subsidiary’s convertible bonds. The following consolidated financial statements are for 2017 and 2018: 2017 2018 Revenues $ (965,000 ) $ (1,095,000 ) Cost of goods sold 623,000 663,000 Depreciation and amortization 113,000 146,000 Gain on sale of building 0 (43,000 ) Interest expense 53,000 53,000 Consolidated net income (176,000 ) (276,000 ) to noncontrolling interest 32,000 34,000 to parent company $ (144,000 )...

Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1,...

Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1, 2017, for $306,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $784,000 at January 1, 2017. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values except for a copyright whose value accounted for Belden's excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16...

Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1,...

Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1, 2017, for $310,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $808,000 at January 1, 2017. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values except for a copyright whose value accounted for Belden's excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16...

Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1,...

Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1, 2017, for $306,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $784,000 at January 1, 2017. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values except for a copyright whose value accounted for Belden's excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16...

Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1,...

Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1, 2017, for $320,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $804,000 at January 1, 2017. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values except for a copyright whose value accounted for Belden's excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16...

Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1,...

Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1, 2017, for $316,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $828,000 at January 1, 2017. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values except for a copyright whose value accounted for Belden's excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16...

The Lopez-Portillo Company has $10.3 million in assets, 70 percent financed by debt and 30 percent...

The Lopez-Portillo Company has $10.3 million in assets, 70 percent financed by debt and 30 percent financed by common stock. The interest rate on the debt is 12 percent and the par value of the stock is $10 per share. President Lopez-Portillo is considering two financing plans for an expansion to $16.5 million in assets. Under Plan A, the debt-to-total-assets ratio will be maintained, but new debt will cost a whopping 14 percent! Under Plan B, only new common stock...

Question

Parker, Inc., acquires 70 percent of Sawyer Company for $420,000. The remaining 30 percent of Sawyer’s...

Solutions

Expert Solution

Related Solutions

Parker, Inc., acquires 70 percent of Sawyer Company for $420,000. The remaining 30 percent of Sawyer’s...

Parker, Inc., acquires 70 percent of Sawyer Company for $420,000. The remaining 30 percent of Sawyer’s...

Bolero Company holds 70 percent of the common stock of Rivera, Inc., and 30 percent of...

Bolero Company holds 70 percent of the common stock of Rivera, Inc., and 30 percent of...

Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1,...

Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1,...

Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1,...

Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1,...

Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1,...

The Lopez-Portillo Company has $10.3 million in assets, 70 percent financed by debt and 30 percent...