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On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $52,152....
On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $52,152. Calvin Co. has one recorded asset, a specialized production machine with a book value of $18,500 and no liabilities. The fair value of the machine is $75,000, 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 $86,920.
At the end of the year, Calvin reports the following in its financial statements:
| Revenues | $ | 54,750 | Machine | $ | 16,650 | Common stock | $ | 10,000 | |||
| Expenses | 22,200 | Other assets | 20,900 | Retained earnings | 27,550 | ||||||
| Net income | $ | 32,550 | Total assets | $ | 37,550 | Total equity | $ | 37,550 | |||
| 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.
| AMOUNT | |
| Noncontrolling interest in subsuduary | |
| Total noncontrolling interest | |
| Calvin's machine (net accumulated depreciation) | |
| Process trade secret |
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| Acaquisiton day fair value | 86920 | ||
| Less: Book Value | 18500 | ||
| Fair value in excess of book value | 68420 | ||
| Allocation: | Life | Amortization per year | |
| -To Machine (75000-18500) | 56500 | 10 | 5650 |
| -To Patent (68420-56500) | 11920 | 4 | 2980 |
| 8630 | |||
| 1 | |||
| Not Controlling interest in Subs 40%: | |||
| Total | Non Controlling Interest 40% | ||
| Subs Revenue | 54750 | 21900 | |
| Less: Subs Expense | 22200 | 8880 | |
| Less: Excess Amortization (Working above) | 8630 | 3452 | |
| Not Controlling interest in Subs 40%: | 9568 | ||
| 2 | |||
| Total Non Controlling Interest | |||
| Working | $ | ||
| Beginning Balance | 86920*40% | 34768 | |
| Add: Allocation from Part-1 | Part-1 | 9568 | |
| Less: Dividend | 5000*40% | 2000 | |
| End of year (Total Non Controlling Interest) | 42336 | ||
| 3 | |||
| Clavin's Machine (Net) | |||
| Book Value Net (18500-Dep 18500/10) | 16650 | ||
| Add:Excess Allocation (Working on top) | 56500 | ||
| Less: Excess Amortization (Working on top) | 5650 | ||
| Clavin's Machine (Net) | 67500 | ||
| or Fair Value-Dep (75000-75000/10 year) | 67500 | ||
| 4 | |||
| Patent Secret | |||
| 11920-2980 (From working on top) | 8940 |
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