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 1 year ago

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

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

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