On January 1, Patterson Corporation acquired 80 percent of the 100,000 outstanding voting shares of Soriano, Inc.,
Question:
On January 1, Patterson Corporation acquired 80 percent of the 100,000 outstanding voting shares of Soriano, Inc., in exchange for $31.25 per share cash. The remaining 20 percent of Soriano’s shares continued to trade for $30 both before and after Patterson’s acquisition. |
On January 1, Soriano’s book and fair values were as follows: |
Book Values | Fair Values | Remaining Life | ||||
Current assets | $ | 80,000 | $ | 80,000 | ||
Buildings and equipment | 1,250,000 | 1,000,000 | 5 | years | ||
Trademarks | 700,000 | 900,000 | 10 | years | ||
Patented technology | 940,000 | 2,000,000 | 4 | years | ||
$ | 2,970,000 | |||||
Current liabilities | $ | 180,000 | $ | 180,000 | ||
Long-term notes payable | 1,500,000 | 1,500,000 | ||||
Common stock | 50,000 | |||||
Additional paid-in capital | 500,000 | |||||
Retained earnings | 740,000 | |||||
$ | 2,970,000 | |||||
In addition, Patterson assigned a $600,000 value to certain unpatented technologies recently developed by Soriano. These technologies were estimated to have a 3-year remaining life. |
During the year, Soriano declared a $30,000 dividend for its shareholders. The companies reported the following revenues and expenses from their separate operations for the year ending December 31. |
Patterson | Soriano | |
Revenues | 3,000,000 | 1,400,000 |
Expenses | 1,750,000 | 600,000 |
a. | What total value should Patterson assign to its Soriano acquisition in its January 1 consolidated balance sheet? |
b. | What valuation principle should Patterson use to report each of Soriano’s identifiable assets and liabilities in its January 1 consolidated balance sheet? |
d. | How much goodwill resulted from Patterson’s acquisition of Soriano? |
e. | What is the consolidated net income for the year and what amounts are allocated to the controlling and noncontrolling interests? |
f. | What is the noncontrolling interest amount reported in the December 31 consolidated balance sheet? |
g. | Calculate the bargain purchase assuming that Soriano's January 1 total fair value, based on its share prices, was assessed at $2,250,000. |
Advanced Accounting
ISBN: 978-0077431808
10th edition
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik