Question

On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $48,960....

On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $48,960. Calvin Co. has one recorded asset, a specialized production machine with a book value of $19,900 and no liabilities. The fair value of the machine is $68,400, 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 $81,600.

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

Revenues $ 58,050 Machine $ 17,910 Common stock $ 10,000
Expenses 22,050 Other assets 23,090 Retained earnings 31,000
Net income $ 36,000 Total assets $ 41,000 Total equity $ 41,000
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 subsidiary income
Total noncontrolling interest
Calvin's machine (net accumulated depreciation)
Process trade secret
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Answer #1
Fair Value of the company 81600
Book value -19900
Fair Value in excess of Book value 61700
To machine(68400-19900) 48500
To process trade secret 13200
Excess depreciation to machine per year (48500/10) 4850
Excess amortization to process trade secret per year(13200/4) 3300
Non controlling interest in subsidiary income
40%*(58050-22050-4850-3300) 11140
End of year noncontrolling interest
Beginning Balance(81600*40%) 32640
Income allocation 11140
Dividend reduction(40%*5000) -2000
End of year noncontrolling interest 41780
Machine(net) = (17910+48500-4850) 61560
Process trade secret(13200-3300) 9900
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