Assume that the acquisition took place on January 1. What figures would appear in a consolidated income statement for this year? Assume that the acquisition took place on April 1. Sawyer’s revenues and expenses occurred uniformly throughout the year. What amounts would appear in a consolidated income statement for this yea
Parker, Inc., acquires 70 percent of Sawyer Company for $420,000. The remaining 30 percent of Sawyer’s outstanding shares continue to trade at a collective value of $174,000. On the acquisition date, Sawyer has the following accounts:
| Book Value | Fair Value | ||||||
| Current assets | $ | 210,000 | $ | 210,000 | |||
| Land | 170,000 | 180,000 | |||||
| Buildings | 300,000 | 330,000 | |||||
| Liabilities | (280,000 | ) | (280,000 | ) | |||
The buildings have a 10-year remaining life. In addition, Sawyer holds a patent worth $140,000 that has a five-year remaining life but is not recorded on its financial records. At the end of the year, the two companies report the following balances:
| Parker | Sawyer | |||||
| Revenues | $ | (900,000 | ) | $ | (600,000 | ) |
| Expenses | 600,000 | 400,000 | ||||
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Assume that the acquisition took place on January 1. What figures would appear in a consolidated income statement for this year?
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Assume that the acquisition took place on April 1. Sawyer’s revenues and expenses occurred uniformly throughout the year. What amounts would appear in a consolidated income statement for this year?
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