On January 1, 2021, Ackerman Company acquires 80% of Seidel Company for $1,934,560 in cash consideration....

On January 1, 2021, Ackerman Company acquires 80% of Seidel Company for $1,934,560 in cash consideration. The remaining 20 percent noncontrolling interest shares had an acquisition-date estimated fair value of $483,640. Seidel’s acquisition-date total book value was $1,921,000.

The fair value of Seidel’s recorded assets and liabilities equaled their carrying amounts. However, Seidel had two unrecorded assets—a trademark with an indefinite life and estimated fair value of $276,850 and several customer relationships estimated to be worth $203,400 with four-year remaining lives. Any remaining acquisition-date fair value in the Seidel acquisition was considered goodwill.

During 2021, Seidel reported $194,360 net income and declared and paid dividends totaling $56,500. Also in 2021, Ackerman reported $395,500 net income, but neither declared nor paid dividends.

What amount should Ackerman assign to the 20 percent noncontrolling interest of Seidel at the acquisition date?
How much of 2021 consolidated net income should be allocated to the noncontrolling interest?
What amount of 2021 dividends should be allocated to the noncontrolling interest?
What amount of noncontrolling interest should appear in the owners’ equity section of Ackerman’s consolidated balance sheet at December 31, 2021?

Solutions

Expert Solution

Answer:

(a)
The amount should Ackerman assign to the 20 percent noncontrolling interest of Seidel at the acquisition date = $483,640

The fair value of non-controlling interest (provided within the question)
Non controlling interest measured at Fair value = $483,640

(b)
Consolidated net income allocation to Non controlling interest is $27,572

Net income before the dividend = $194,360
Less: Dividend = ($56,500)
Net income after dividend = $137,860

Net income to be allocated to Non controlling interest = ($137,860 * 20%)
= $27,572

(c)
The amount of 2021 dividends should be allocated to the noncontrolling interest = $11,300

Dividend allocation to Non controlling interest = ($56,500*20%)
= $11,300

(d)
The amount of noncontrolling interest should appear in the owners’ equity section of Ackerman’s consolidated balance sheet on December 31, 2021 = $511,212

Non-controlling interest at the date of acquisition = $483,640
Add: Share of Net income after dividend = $27,572
Non controlling interest in seidel = $511,212

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ekkarill92 answered 1 year ago

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