Problem 4-14 (Algo) (LO 4-2, 4-4, 4-5) On January 1, 2023, French Company acquired 60 percent of K-Tech Company for $337,500 when K-Tech's book value was $437,500. The fair value of the newly comprised 40 percent noncontrolling interest was assessed at $225,000. 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 $45,000. In 2023, K-Tech reports $17,500 net income and declares no dividends. At the end of 2024, the two companies report the following figures (stockholders' equity accounts have been omitted) Itens Current assets Trademarks Patented technology Liabilities Revenues Expenses Investment income French Company Carrying Amount $645,000 205,000 435,000 (415,000) (925,000) 475,000 Not given Note: Parentheses indicate a credit balance. K-Tech Company Carrying Amounts $325,000 225,000 175,000 a Consolidated net income b(1) Noncontrolling interest's share of the subsidiary's income b(2), Noncontrolling interest at end of 2024 Consolidated trademarks (145,000) (425,000) 325,000 X-Tech Company Fale Values 345,000 305,000 220,000 (145,000) 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.
Problem 4-14 (Algo) (LO 4-2, 4-4, 4-5) On January 1, 2023, French Company acquired 60 percent of K-Tech Company for $337,500 when K-Tech's book value was $437,500. The fair value of the newly comprised 40 percent noncontrolling interest was assessed at $225,000. 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 $45,000. In 2023, K-Tech reports $17,500 net income and declares no dividends. At the end of 2024, the two companies report the following figures (stockholders' equity accounts have been omitted) Itens Current assets Trademarks Patented technology Liabilities Revenues Expenses Investment income French Company Carrying Amount $645,000 205,000 435,000 (415,000) (925,000) 475,000 Not given Note: Parentheses indicate a credit balance. K-Tech Company Carrying Amounts $325,000 225,000 175,000 a Consolidated net income b(1) Noncontrolling interest's share of the subsidiary's income b(2), Noncontrolling interest at end of 2024 Consolidated trademarks (145,000) (425,000) 325,000 X-Tech Company Fale Values 345,000 305,000 220,000 (145,000) 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.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 30E
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Transcribed Image Text:Problem 4-14 (Algo) (LO 4-2, 4-4, 4-5)
On January 1, 2023, French Company acquired 60 percent of K-Tech Company for $337,500 when K-Tech's book value was $437,500.
The fair value of the newly comprised 40 percent noncontrolling interest was assessed at $225,000, 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 $45,000.
In 2023, K-Tech reports $17,500 net income and declares no dividends. At the end of 2024, the two companies report the following
figures (stockholders' equity accounts have been omitted):
Itens
Current assets
Trademarks
Patented technology
Liabilities
Revenues
Expenses
Investment income
French Company
Carrying Amount
$645,000
205,000
435,000
(415,000)
(925,000)
475,000
Not given
K-Tech Company
Carrying
Amounts
$325,000
225,000
175,000
(145,000)
(425,000)
325,000
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
x-Tech Company
Fair Values
345,000
305,000
220,000
(145,000)
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.
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