On July 1, 2018, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for
Question:
On July 1, 2018, 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 2018. 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 non-controlling interests?
c. How did Truman derive the Investment in Atlanta account balance at the end of 2018?
d. 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.
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of... Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Step by Step Answer:
Advanced Accounting
ISBN: 978-1259444951
13th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupni