Question

#8) On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $45,948. Calvin Co. has one recorded asset, a specialized production machine with a book value of $14,900 and no liabilities. The fair value of the machine is $65,900, 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 $76,580.

At the end of the year, Calvin reports the following in its financial statements:

Revenues	$	64,800		Machine	$	13,410		Common stock	$	10,000
Expenses		33,900		Other assets		22,490		Retained earnings		25,900
Net income	$	30,900		Total assets	$	35,900		Total equity	$	35,900
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 SUBSIDARY INCOME
TOTAL NONCONTROLLING INTEREST
CALVINS MACHINE (NET ACUMULATED DEPRECIATION)
PROCESS TRADE SECRET

Please show calculations; thanks.

Answer 1

Fair value of Calvin's (given)	$76,850
Calvin's Book value	-$14,900
Fair value in excess of book value	$61,950
Allocated	Amortization
To machine ($65900 - 14900)=$51,000 /10 years	$51,000	$5,100	Per Year
To process trade secret =( $54,640 - $51000)/4 years	$10,950	$2,737.5	Per Year
Total	$61,950	$7,837.5	Per Year
a) Non-controlling interest in subsidiary Income
Net income allocation 40% x ($64,800 revenues - $33,900+7837.5 expenses)	$9,225
b)Total Non controlling Interest
Beginning balance ($76,850 x 40%)	$30,740
Net income allocation 40% x ($64,800 revenues - $33,900+7837.5 expenses)	$9,225
Dividend reduction (40% x ? $5,000)	-$2,000
Total Non controlling Interest	$37,965
c) Calvin's Machine (net)
Machine = ($13,410 book value + $51000 excess allocation - $5,100 excess depreciation for one year)	$59,310
d) Process trade secret (net)
Process trade secret (net) = 10950 -2737.5	$8,212.5