On July 1, 2021, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $720,000 in cash and equity securities. The remaining 30 percent of Atlanta’s shares traded closely near an average price that totaled $290,000 both before and after Truman’s acquisition.

In reviewing its acquisition, Truman assigned a $100,000 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 2021. In addition, the subsidiary’s income was earned uniformly throughout the year. The subsidiary declared dividends quarterly.

Answer each of the following:

a. How did Truman allocate Atlanta’s acquisition-date fair value to the various assets acquired and liabilities assumed in the combination?

b. How did Truman allocate the goodwill from the acquisition across the controlling and noncontrolling interests?

c. How did Truman derive the Investment in Atlanta account balance at the end of 2021?

d. Prepare a worksheet to consolidate the financial statements of these two companies as of December 31, 2021. At year-end, there were no intra-entity receivables or payables.

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Truman Atlanta $ (670,000) 402,000 (35,000) $ (400,000) 280,000 Revenues Operating expenses Income of subsidiary -0- $ (303,000) $ (120,000 $ (500,000) (120,000) 80,000 $ (540,000) $ 390,000 -0- 200,000 630,000 Net income Retained earnings, 1/1/21 Net income (above) $ (823,000) (303,000) 145,000 Dividends declared Retained earnings, 12/31/21 $ (981,000) $ 481,000 727,000 Current assets Investment in Atlanta 388,000 701,000 Land Buildings $ 1,220,000 $ (360,000) (300,000) (20,000 (540,000) $(1.220,000 Total assets $2,297,000 $ (816,000) (95,000) (405,000) (981,000) $(2,297,000) Liabilities Common stock Additional paid-in capital Retained earnings, 12/31/21 Total liabilities and stockholders' equity.