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On January 1, 2018, Johnsonville Enterprises, Inc. acquired 80 percent of Stayer Companys outstanding common shares in excha

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Answer #1

For ease, Johnsonville is denoted by J and Strayer company is denoted by J.

  1. Amount to be reported for technology processes

At acquisition date, fair value = $ 1,000,000

Remaining life of process = 20 years

Hence, amortization for 2015      = Fair value at acquisition date/Remaining life

                                                                = 1,000,000/20

                                                                = $ 50,000

Amount to be reported on consolidated financial statement = Fair value – Amortization for 2015

                                                                                                                     = $ 1,000,000 – 50,000

                                                                                                                     = $ 950,000                   

  1. Amount to be reported for building

At acquisition date, fair value = $ 345,000

Remaining life = 10 years

Depreciation for 2015 = Fair value/Remaining life = 345,000/10 = $ 34,500

Amount to be reported for building in consolidated financial statement

                                                = Fair value at acquisition date – depreciation for 2015

                                                = 345,000 – 34,500

                                                = $ 310,500

  1. Net income attributable to controlling interest

Particulars

Details

Amount ($)

Reported earnings of enterprise J

650,000

Reported earnings of S

350,000

Less: Amortisation for tech process

50,000

          Adjustment for Building ( 345,000-195,000)/10

15,000

Adjusted earnings for S

285,000

Share of J in S earnings (285,000-80%)

80%

228,000

Net income attributable to controlling interest ( 650,000 + 228,000)

878,000

  1. Net income attributable to non-controlling interest

Particulars

Details

Amount ($)

Reported earnings of S

350,000

Less : Excess fair value amortization/depreciation

           Technology processes

50,000

          Adjustment for Building ( 345,000-195,000)/10

15,000

(65,000)

Adjusted earnings for S

285,000

Non-controlling interest

20%

Net income attributable to non-controlling interest (285,000*20%)

57,000

  1. Amount of non-controlling interest

Particulars

Amount ($)

Fair value of S on acquisition date ( 3,000,000/80%)

3,750,000

Non-controlling interest

20%

Fair value of non-controlling interest on acquisition date

750,000

Add: Non-controlling interest in S net income

57,000

Less: non-controlling interest in S dividend ( 50,000 *20%)

10,000

Non-controlling interest to be reported on December 31, 2015

$ 797,000

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