West Company acquired 60 percent of Solar Company for $304,500 when Solar’s book value was $404,500....

West Company acquired 60 percent of Solar Company for $304,500 when Solar’s book value was $404,500. The newly comprised 40 percent non-controlling interest had an assessed fair value of $203,000. Also at the acquisition date, Solar had a trademark (with a 20-year life) that was undervalued in the financial records by $63,000. Also, patented technology (with a 10-year life) was undervalued by $43,000. Two years later, the following figures are reported by these two companies (stockholders’ equity accounts have been omitted):

West Company Book Value Solar Company Book Value Solar Company Fair Value
  Current assets $ 623,000 $ 303,000 $ 323,000
  Trademarks 263,000 203,000 283,000
  Patented technology 413,000 153,000 153,000
  Liabilities (393,000 ) (123,000 ) (123,000 )
  Revenues (903,000 ) (403,000 )
  Expenses 497,000 303,000
  Investment income Not given

What is the consolidated trademarks balance?

Homework Answers

Answer #1


West Company holds 60% share in Solar Company. Therefore while preparing the consolidated Balance Sheet, the balance of consolidated trademarks will be as under-  

West's own trademarks $ 263,000
Add: Book Value of Solar's trademark $ 203,000
Add: Correction of undervalued trademarks $ 63,000
Less: Amortization of trademark previously undervalued (Working) $ 6,300
Consolidated balance of Trademarks $ 522,700


Trademarks are to be amortized over their life. Calculation of amortization on undervalued trademarks is $ 63,000 x 2/20 = $ 6,300

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