Question

On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $39,024....

On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $39,024. Calvin Co. has one recorded asset, a specialized production machine with a book value of $10,400 and no liabilities. The fair value of the machine is $51,400, 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 $65,040.

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

Revenues $ 65,250 Machine $ 9,360 Common stock $ 10,000
Expenses 29,700 Other assets 31,190 Retained earnings 30,550
Net income $ 35,550 Total assets $ 40,550 Total equity $ 40,550
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.

Homework Answers

Answer #1
Fair Value of company $65,040
Book Value 10400
Fair Value in excess of book value $54,640
Machine 51400
Process trade secret $3,240
Excess Depreciation 5140
Excess Amortization to process trade per year $810
Non Controlling interest in subsidiary income
40%*(65250-29700-5140-810) 11840
End of Year non controlling interest
Beginning Balance (40%*65040) 26016
Income Allocation 11840
Dividend Reduction (40%*5000) 2000
End of Year non controlling interest 35856
Machine (net) 55620 (9360+51400-5140)
Process Trade Secret 2430 (3240-810)
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