On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $48,900....

On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $48,900. Calvin Co. has one recorded asset, a specialized production machine with a book value of $15,600 and no liabilities. The fair value of the machine is $68,100, 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 $81,500. At the end of the year, Calvin reports the following in its financial statements: Revenues $ 55,350 Machine $ 14,040 Common stock $ 10,000 Expenses 22,650 Other assets 23,660 Retained earnings 27,700 Net income $ 32,700 Total assets $ 37,700 Total equity $ 37,700 Dividends paid $ 5,000 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.

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Answer:-

Given information,

outstanding stock of Calvin = $48,900

Fair value = $81,500

Book value = $15,600

machine = $68,100

Useful life = 10 years

Estimated future life = 4 years

Now we need to findout the Fair value of excess of book value , fair value of machine , Process trade secret.

Fair value of excess of book value = $81,500 - $15,600

= $65,900

Fair value of excess of book value = $65,900

Fair value of machine = [ $68,100 - $15,600 ] / 10 years

= 52,500 / 10

= $5,250

Fair value of machine = $5,250

Process trade secret = [ $65,900 - 52,500 ] / 4years

= 13,400 / 4

= $3,350

Process trade secret = $3,350

Consolidated figures:-

Particulars	Amount
Net income attributable to noncontrolling interest	= [ 55,350 - 22,650 ] * [ 100% - 60% ] = 32,700 * 40% = $13,080

End- of- year Noncontrolling interest :-
Beginning balance	= [ 100% - 60% ] * 81,500 = 40% * 81,500 = 0.40 * 81,500 = $32,600
Net income allocation	$13,080
Dividend reduction	= [ 100% - 60% ] * 5,000 = 40% * 5,000 = 0.40 * 5,000 = $2,000
End- of- year Noncontrolling interest	= [32,600 + $13,080 ] - 2,000 = 45,680 - 2,000 = $43,680

Calvin's machine	= $14,040 + [ $68,100 - $15,600 ] - 5,250 = 14,040 + 52,500 - 5,250 = 66,540 - 5,250 = $61,290

Process trade secret	= [ $65,900 - 52,500 ] - 3,350 = 13,400 - 3,350 = $10,050

ekkarill92 answered 1 year ago

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