On January 1, 2023, French Company acquired 60 percent of K-Tech Company for $315,000 when K-Tech's book value was $415,000 The fair value of the newly comprised 40 percent noncontrolling interest was assessed at $210,000. At the acquisition date, K-Tech's trademark (10-year remaining life) was undervalued in its financial records by $80,000. Also, patented technology (5-year remaining life) was undervalued by $30,000.
On January 1, 2023, French Company acquired 60 percent of K-Tech Company for $315,000 when K-Tech's book value was $415,000 The fair value of the newly comprised 40 percent noncontrolling interest was assessed at $210,000. At the acquisition date, K-Tech's trademark (10-year remaining life) was undervalued in its financial records by $80,000. Also, patented technology (5-year remaining life) was undervalued by $30,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2023, French Company acquired 60 percent of K-Tech Company for $315,000 when K-Tech's book value was $415,000.
The fair value of the newly comprised 40 percent noncontrolling interest was assessed at $210,000. At the acquisition date, K-Tech's
trademark (10-year remaining life) was undervalued in its financial records by $80,000. Also, patented technology (5-year remaining
life) was undervalued by $30,000.
In 2023, K-Tech reports $25,000 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
Current assets
Patented technology
Trademarks
Liabilities
Revenues
French Company
Carrying Amounts
$ 630,000
270,000
K-Tech Company
Carrying Amounts
$ 310,000
420,000
(400,000)
210,000
160,000
(130,000)
K-Tech Company
Fair Values
$ 330,000
290,000
190,000
(130,000)
Expenses
Investment income
(910,000)
(410,000)
0
490,000
310,000
0
Not given
0
0
Note: Parentheses indicate a credit balance.
Required:
a. Compute the 2024 consolidated net income before allocation to the controlling and noncontrolling interests.
b. 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.
c. Compute the amount reported for trademarks in the 2024 consolidated balance sheet.
a. Consolidated net income
b(1). Noncontrolling interest's share of the subsidiary's income
b(2). Noncontrolling interest at end of 2024
c. Consolidated trademarks
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Step 1: Define 'Consolidation':
VIEWStep 2: (a) Compute the 2024 consolidated net income before allocation to controlling and non-controlling:
VIEWStep 3: (b-1) Compute the noncontrolling interest's share of the subsidiary's income:
VIEWStep 4: (b-2) Compute the ending balance of the noncontrolling interest in the subsidiary:
VIEWStep 5: (c) Compute the amount reported for trademarks in the 2024 consolidated balance sheet:
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