On July 1, 2021, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $777,700 in cash and equity securities. The remaining 30 percent of Atlanta's shares traded closely near an average price that totaled $333,300 both before and after Truman's acquisition. In reviewing its acquisition, Truman assigned a $147,500 fair value to a patent recently developed by Atlanta, even though it was not recorded within the financial records of the subsidiary. This patent is anticipated to have a remaining life of five years. The following financial information is available for these two companies for 2021. In addition, the subsidiary's income was earned uniformly throughout the year. The subsidiary declared dividends quarterly. Revenues Operating expenses Income of subsidiary Net income Retained earnings, 1/1/21 Net income (above) Dividends declared Retained earnings, 12/31/21 Current assets Investment in Atlanta Land Buildings Truman (805,725) $ Atlanta 480,000 (500,000) 344,000 (44,275) 0 $ (370,000) $ (156,000) $ (895,000) $ (520,000) (370,000) (156,000) 155,000 50,000 $ (1,110,000) $ (626,000) $ 509,525 $ 284,000 804,475 Ө 479,000 291,000 725,000 721,000 $ 2,518,000 (908,000) $ (350,000) $ 1,296,000 Total assets Liabilities $ Common stock (95,000) (300,000) Additional paid-in capital Retained earnings, 12/31/21 (405,000) (1,110,000) (20,000) (626,000) Total liabilities and stockholders' equity $ (2,518,000) $ (1,296,000) a. What is the excess fair-value assigned to patent and goodwill? b. How did Truman allocate the goodwill from the acquisition across the controlling and noncontrolling interests? c. How did Truman derive the Investment in Atlanta account balance at the end of 2021? d. Prepare a worksheet to consolidate the financial statements of these two companies as of December 31, 2021. At year-end, there were no intra-entity receivables or payables.
On July 1, 2021, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $777,700 in cash and equity securities. The remaining 30 percent of Atlanta's shares traded closely near an average price that totaled $333,300 both before and after Truman's acquisition. In reviewing its acquisition, Truman assigned a $147,500 fair value to a patent recently developed by Atlanta, even though it was not recorded within the financial records of the subsidiary. This patent is anticipated to have a remaining life of five years. The following financial information is available for these two companies for 2021. In addition, the subsidiary's income was earned uniformly throughout the year. The subsidiary declared dividends quarterly. Revenues Operating expenses Income of subsidiary Net income Retained earnings, 1/1/21 Net income (above) Dividends declared Retained earnings, 12/31/21 Current assets Investment in Atlanta Land Buildings Truman (805,725) $ Atlanta 480,000 (500,000) 344,000 (44,275) 0 $ (370,000) $ (156,000) $ (895,000) $ (520,000) (370,000) (156,000) 155,000 50,000 $ (1,110,000) $ (626,000) $ 509,525 $ 284,000 804,475 Ө 479,000 291,000 725,000 721,000 $ 2,518,000 (908,000) $ (350,000) $ 1,296,000 Total assets Liabilities $ Common stock (95,000) (300,000) Additional paid-in capital Retained earnings, 12/31/21 (405,000) (1,110,000) (20,000) (626,000) Total liabilities and stockholders' equity $ (2,518,000) $ (1,296,000) a. What is the excess fair-value assigned to patent and goodwill? b. How did Truman allocate the goodwill from the acquisition across the controlling and noncontrolling interests? c. How did Truman derive the Investment in Atlanta account balance at the end of 2021? d. Prepare a worksheet to consolidate the financial statements of these two companies as of December 31, 2021. At year-end, there were no intra-entity receivables or payables.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
hre.3
Transcribed Image Text:On July 1, 2021, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $777,700 in
cash and equity securities. The remaining 30 percent of Atlanta's shares traded closely near an average price that totaled $333,300
both before and after Truman's acquisition.
In reviewing its acquisition, Truman assigned a $147,500 fair value to a patent recently developed by Atlanta, even though it was not
recorded within the financial records of the subsidiary. This patent is anticipated to have a remaining life of five years.
The following financial information is available for these two companies for 2021. In addition, the subsidiary's income was earned
uniformly throughout the year. The subsidiary declared dividends quarterly.
Revenues
Operating expenses
Income of subsidiary
Net income
Retained earnings, 1/1/21
Net income (above)
Dividends declared
Retained earnings, 12/31/21
Current assets
Investment in Atlanta
Land
Buildings
Truman
(805,725) $
Atlanta
480,000
(500,000)
344,000
(44,275)
0
$
(370,000) $ (156,000)
$ (895,000) $
(520,000)
(370,000)
(156,000)
155,000
50,000
$ (1,110,000)
$
(626,000)
$
509,525
$
284,000
804,475
Ө
479,000
291,000
725,000
721,000
$ 2,518,000
(908,000) $ (350,000)
$ 1,296,000
Total assets
Liabilities
$
Common stock
(95,000)
(300,000)
Additional paid-in capital
Retained earnings, 12/31/21
(405,000)
(1,110,000)
(20,000)
(626,000)
Total liabilities and stockholders' equity
$ (2,518,000)
$ (1,296,000)
a. What is the excess fair-value assigned to patent and goodwill?
b. How did Truman allocate the goodwill from the acquisition across the controlling and noncontrolling interests?
c. How did Truman derive the Investment in Atlanta account balance at the end of 2021?
d. Prepare a worksheet to consolidate the financial statements of these two companies as of December 31, 2021. At year-end, there
were no intra-entity receivables or payables.
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