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West Company acquired 60 percent of Solar Company for $301,500 when Solar’s book value was $401,500. The newly comprised 40 percent noncontrolling interest had an assessed fair value of $201,000. Also at the acquisition date, Solar had a trademark (with a 20-year life) that was undervalued in the financial records by $61,000. Also, patented technology (with a 10-year life) was undervalued by $41,000. Two years later, the following figures are reported by these two companies (stockholders’ equity accounts have been omitted):

	West Company Book Value				Solar Company Book Value				Solar Company Fair Value
Current assets	$	621,000			$	301,000			$	321,000
Trademarks		261,000				201,000				281,000
Patented technology		411,000				151,000				151,000
Liabilities		(391,000	)			(121,000	)			(121,000	)
Revenues		(901,000	)			(401,000	)
Expenses		499,000				301,000
Investment income		Not given

Assuming Solar Company has declared no dividends, what are the noncontrolling interest’s share of the subsidiary’s income and the ending balance of the noncontrolling interest in the subsidiary?

Answer 1

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A B D 1 2 Amount 401000 3 4 Non-controlling interest's share of the subsidiary's income Revenue of solar company Less Expense Less: Amortization on trademark (61000/20 years) Less: Amortization on patent (41000/10 years) Subsidairy net income NCI share Non-controlling interest's share of the subsidiary's income -301000 -3050 -4100 5 6 7 8 92850 40% 37140 9 10 11 12 Amount 13 301000 14 2010001 15 151000 16 - 121000 17 532000 18 -401000 Solar and NCI valuations: Current assets Trademarks Patented technology Liabilities Solar book value at end of year 2 Solar book value at acquisition date Increase in book value (2 years) NCI percentage NCI share of book value increase NCI share of excess fair value amortization (2years) Increase in NCI since acquisition Fair value of noncontrolling interest at acquisitiondate Noncontrolling interest at end of year 2 19 20 131000 40% 524001 21 22 -5720 23 46680 201000 24 25 247680 26 27 Sheet188 Sheet189 Sheet190 Sheet191 Sheet192 Sheet193 Sheet1 Ready