Question

On July 1, 2018, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $789,250 in cash and equity securities. The remaining 30 percent of Atlanta’s shares traded closely near an average price that totaled $338,250 both before and after Truman’s acquisition.In reviewing its acquisition, Truman assigned a $136,500 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 2018. In addition, the subsidiary’s income was earned uniformly throughout the year. The subsidiary declared dividends quarterly.

	Truman				Atlanta
Revenues	$	(802,355	)		$	(559,000	)
Operating expenses		477,000				367,000
Income of subsidiary		(57,645	)			0
Net income	$	(383,000	)		$	(192,000	)
Retained earnings, 1/1/18	$	(848,000	)		$	(518,000	)
Net income (above)		(383,000	)			(192,000	)
Dividends declared		155,000				70,000
Retained earnings, 12/31/18	$	(1,076,000	)		$	(640,000	)
Current assets	$	475,605			$	514,000
Investment in Atlanta		822,395				0
Land		451,000				213,000
Buildings		705,000				636,000
Total assets	$	2,454,000			$	1,363,000
Liabilities	$	(878,000	)		$	(403,000	)
Common stock		(95,000	)			(300,000	)
Additional paid-in capital		(405,000	)			(20,000	)
Retained earnings, 12/31/18		(1,076,000	)			(640,000	)
Total liabilities and stockholders' equity	$	(2,454,000	)		$	(1,363,000	)

1.How did Truman allocate Atlanta’s acquisition-date fair value to the various assets acquired and liabilities assumed in the combination 2. How did Truman allocate the goodwill from the acquisition across the controlling and noncontrolling interests?3.How did Truman derive the Investment in Atlanta account balance at the end of 2018? 4. Prepare a worksheet to consolidate the financial statements of these two companies as of December 31, 2018. At year-end, there were no intra-entity receivables or payables.  

Questions:

How to get book value $899,000 on answer Part A?

How to get $24,705 at noncontrolling interest on answer Part D?

How to get (S) $183,500, $629,300 & $269,700 on answer Part D ?

Answer 1

Calculation of Book Value of Atlanta as on 07/01/18 (i.e. at the date of Acquisition) Retained Earnings as on 01/01/18 518,000 Add: Net Income for the Half year (192,000/2) 96,000 Less: Dividend paid for the Half year (70,000/2) (35,000) Retained Earnings as on 07/01/18 579,000 Calculation of Atlanta Book Value as on 07/01/18 Common Stock Additional Paid in capital Retained Earnings as on 07/01/18 Book Value as on 07/01/18 300,000 20,000 579,000 899,000 Consideration transferred by Truman Fair value of Non Controlling Interest Fair value of Altanta Less: Book Value of Atlant Fair value in excess of Book Value Excess fair value assigned Patents Goodwill (Balance) (241,925 - 136,500) 789,250 351,675 1,140,925 (899,000) 241,925 136,500 105,425 Calculation of Amortization Expenses Amortization expense Amortization expense for for the year [c] = (a/b) half year (c/2) 27,300 13,650 Patents Goodwill Total Value Assigned (a) Life (b) 136,500 5 105,425 NA 241,925 27,300 13,650

2) Goodwill Allocation Fair values at acquisiton date Less: Book Value Excess of Fair Value Book Value Less: Allocation of Excess Value to Specific Assets (patents) Truman Non Controlling Interest 70% 30% 789,250 351,675 629,300 269,700 159,950 81,975 95,550 40,950 64,400 41,025 Controlling Interest Non controlling Interest 64,400 41,025 Total 1,140,925 899,000 241,925 136,500 105,425 Goodwill Goodwill 3) Investment in Atlanta Account Balance Adjusted Net Income of Atlanta for the year 2018 Net Income Less: Amortization during the year Adjusted Net Income during the year Adjusted Net Income for the half year (164,700/2) Share of Truman in Adjusted half year income (82,350 x 70%) Share of Non Controlling Interest (82,350 x 30%) 192,000 (27,300) 164,700 82,350 57,645 24,705 Dividend declared by Atlanta for the year Half year dividend (70,000/2) Share of Truman in Dividend (35,000 x 70%) 70,000 35,000 24,500 Investment in Atlanta Initial value at acquisition date Truman's Share of Atlanta's net income for half year Dividends 2018 Investment in Atlanta 789,250 57,645 (24,500) 822,395

TRUMAN COMPANY AND SUBSIDIARY ATLANTA COMPANY Consolidation worksheet For Year Ending December 31, 2018 Adjustment Entries Atlanta Debit Credit (802,355) (559,000) [s] 279,500 477,000 367,000 (e] 13,650 183,500 [s] (57,645) - [i] 57,645 (383,000) (192,000) NCI Consolidated Totals (1,081,855) 674,150 Revenues Operating Expenses Income of Subsidiary Separate company Net Income Consolidated Net Income Net Income attributable to NCI Net Income attributable to Truman (24,705) (407,705) 24,705 (383,000) 518,000 Retained Earnings 1/1 Net Income (above) Dividends declared (848,000) (383,000) 155,000 (518,000) [s] (192,000) 70,000 (848,000) (383,000) 155,000 10,500 24,500 35,000 [d] [s] Retained Earnings 12/31 (1,076,000) (640,000) (1,076,000) 989,605 Current Assets Investment in Atlanta 475,605 822,395 514,000 - [d] 24,500 57,645 [i] 629,300 (s] 159,950 [a] 451,000 705,000 213,000 636,000 Land Buildings Patents Goodwill Total Assets 13,650 [e] [a] [a] 136,500 105,425 664,000 1,341,000 122,850 105,425 3,222,880 2,454,000 1,363,000

Liabilities Common Stock Additional paid in capital Retained Earnings 12/31 Non Controlling Interest 07/01 (878,000) (95,000) (405,000) (1,076,000) (403,000) (300,000) [s] (20,000) [s] (640,000) 300,000 20,000 (1,281,000) (95,000) (405,000) (1,076,000)| 269,700 81,975 [s] [a] (351,675) (365,880) Non Controlling Interest 12/31 Total liabilities and Equity (365,880) (3,222,880) (2,454,000) (1,363,000) 1,455,220 1,455,220 Entries Explanation [i] is to remove the income from subsidiary by eliminating the Investment Balance [d] is to remove the dividend declared by the Atlanta for the half year (70,000/2) [s] is to remove stockholders' equity by reducing the revenue and expenses to half of Atlanta as on 07/01/18 and allocating to NCI Retained Earnings 01/01/18 518,000 Common Stock 300,000 Additional Paid in Capital 20,000 Revenues (559,000/2) 279,500 Operating expense (367,000/2) (183,500) Dividends half year (70,000/2) (35,000) Stockholders' Equity as on 12/31/18 899,000 Parent Share (899,000 x 70%) 629,300 NCI (899,000 x 30%) 269,700 [a] is to record the excess value assigned to specific account as on 07/01/18 [e] is to record the amortization expenses on patent for the half year