Parker, Inc.. acquires 70 percent of Sawyer Company for $420,000. The remaining.30 percent of Sawyer’s outstanding shares continue to trade at a collective value of $174,000. On the acquisition date, Sawyer has the following accounts:
| Book Value | Fair Value |
Current assess | $ 210,000 | $210,000 |
Land | 170,000 | 180,000 |
Buildings | 300,000 | 330,000 |
Liabilities | (280,000) | (280,000) |
The buildings have a 10-year life. In addition, Sawyer holds a patent worth $140,000 that has a five-year life but is not recorded on its financial records. At the end of the year, the two companies report the following balances:
| Parker | Sawyer |
Revenues | $(900,000) | $(600,000) |
Expenses | 600,000 | 400,000 |
a. Assume that the acquisition took place on January 1. What figures would appear in a consolidated income statement for this year?
b. Assume that the acquisition took place on April 1. Sawyer’s revenues and expenses occurred uniformly throughout the year. What amounts would appear in a consolidated income statement for this year?
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