Question

On June 30th, 2018 Parker, Inc. acquired 80% of Sawyer Company for $800,000. The remaining 20% of Sawyer's outstanding shares continue to trade at a collective value of $200,000. On the acquisition date, Sawyer has the following accounts: Current Assets Land Buildings Patent Liabilities Book Value $210,000 170,000 300,000 -0- (280,000) Fair Value $210,000 250,000 450,000 120,000 (280,000) The buildings have a 10-year life and the patent has a 6-year life. Parker reported Net Income for 2018 of $530,000 (excluding any income from Sawyer), and Sawyer separately reported Net Income of $175,000. Sawyer paid dividends for the year of $60,000. You can assume that Sawyer's Net Income and Dividends were earned and paid ratably throughout the year. Fair Value Analysis: a.Consolidated Net Income for the year b.Consolidated Net Income allocated to the Noncontrolling Interest c.Consolidated Net Income allocated to the Controlling Interest d.Balance of the Noncontrolling Interest at the end of the year e.Balance of the Patent account at the end of the year.

Answer 1

Consolidated Net income for the year
Particulars	Amount	Explanation
Sawyer Net Income	175,000
Depreciation on fair value of building	(7,500)	Calculation of depreciation as given
amortization of Patent	(10,000)	Calculation of depreciation as given
Sawyer relevant Net Income for consolidation	157,500
Profit related before the period of 30 June 2018	78,750	This is pre acquisition profit which will directly deducted from Investment in subsidiary in balance sheet. It is assumed that income accrued equally throughout the year hence half income is considered pre and half is considered post acquisition
Profit related after the period of 30 June 2018	78,750
Profit of Parker Inc	530,000
Consolidated Net income for the year	608,750
Consolidated Net income allocated to Controlling interest (80%)	487,000.0	Consolidated net income is divided in the ratio of holding and minority interest share
Consolidated Net income allocated to Non Controlling interest (20%)	121,750.0

Statement showing balance of non controlling interest
Particulars	Amount	Explanation
Opening balance as given	200,000
Add profit during the year attributable	121,750
Less dividend received after the acquisition of shares	(6,000)	Total dividend paid by the subsidiary company $60,000. As it is paid throughout the year it is assumed that before acquisition of shares by holding company was already paid to other shareholders. After the acquisition total dividend payment is 30,000 while 20% of it will be attributable to minority shareholders which is $6000.
Closing balance of Minority interest	315,750

Balance of Patent Account at the end of the year
Particulars	Amount	Explanation
Fair value of Patent at the time of Acquisition	120,000
Depreciation	(10,000)	Patent is depreciated in 6 years starting from 1 July hence in current year only 6 months depreciation is considered. Which is 120000 / 6 / 2
Balance of Patent at the end of the year	110,000

Particulars	Amount
Fair Value of Building	450,000
book Value of Building	300,000
Fair Value differential of Building to be depreciated	150,000
building is depreciated in 10 years starting from 1 July hence in current year only 6 months depreciation is considered. Which is 150000 / 6 / 2	7,500