On January 1, 2023, French Company acquired 60 percent of K-Tech Company for $300,000 when K-Tech’s book value was $400,000. The fair value of the newly comprised 40 percent noncontrolling interest was assessed at $200,000. At the acquisition date, K-Tech's trademark (10-year remaining life) was undervalued in its financial records by $60,000. Also, patented technology (5-year remaining life) was undervalued by $40,000. In 2023, K-Tech reports $30,000 net income and declares no dividends. At the end of 2024, the two companies report the following figures (stockholders’ equity accounts have been omitted): Items French Company Carrying Amounts K-Tech Company Carrying Amounts K-Tech Company Fair Values Current assets $ 620,000 $ 300,000 $ 320,000 Trademarks 260,000 200,000 280,000 Patented technology 410,000 150,000 190,000 Liabilities (390,000) (120,000) (120,000) Revenues (900,000) (400,000) 0 Expenses 500,000 300,000 0 Investment income Not given 0 0 Note: Parentheses indicate a credit balance. Required: Compute the 2024 consolidated net income before allocation to the controlling and noncontrolling interests. In 2024, assuming K-Tech has declared no dividends, compute the noncontrolling interest’s share of the subsidiary’s income and the ending balance of the noncontrolling interest in the subsidiary. Compute the amount reported for trademarks in the 2024 consolidated balance sheet.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

On January 1, 2023, French Company acquired 60 percent of K-Tech Company for $300,000 when K-Tech’s book value was $400,000. The fair value of the newly comprised 40 percent noncontrolling interest was assessed at $200,000. At the acquisition date, K-Tech's trademark (10-year remaining life) was undervalued in its financial records by $60,000. Also, patented technology (5-year remaining life) was undervalued by $40,000.

In 2023, K-Tech reports $30,000 net income and declares no dividends. At the end of 2024, the two companies report the following figures (stockholders’ equity accounts have been omitted):

Items	French Company Carrying Amounts	K-Tech Company Carrying Amounts	K-Tech Company Fair Values
Current assets	$ 620,000	$ 300,000	$ 320,000
Trademarks	260,000	200,000	280,000
Patented technology	410,000	150,000	190,000
Liabilities	(390,000)	(120,000)	(120,000)
Revenues	(900,000)	(400,000)	0
Expenses	500,000	300,000	0
Investment income	Not given	0	0

Note: Parentheses indicate a credit balance.

Required:

Compute the 2024 consolidated net income before allocation to the controlling and noncontrolling interests.
In 2024, assuming K-Tech has declared no dividends, compute the noncontrolling interest’s share of the subsidiary’s income and the ending balance of the noncontrolling interest in the subsidiary.
Compute the amount reported for trademarks in the 2024 consolidated balance sheet.

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