Problem $5($Recommended: review slides $65-70)$

Alpha acquired $70\%$ of Beta$$s shares on July $1,2025$ paying $$750,000$ in equity securities$.$ The remaining $30\%$ of Beta$$s shares traded closely near an average price that totaled $$320,000$ both before and after Alpha$$s acquisition.

In reviewing the acquisition, Alpha assigned a $$100,000$ fair value to a patent recently developed by Beta, even though it was not recorded within the financial records of the subsidiary. This patent is anticipated to have a remaining life of five years. Also, Buildings recorded in Beta$$s book were undervalued by $$30,000$ with remaining life of $10$ years.

Alpha uses the equity method to account for the Investment in Beta.

The following financials are available for these two companies for $2025.$ In addition, the subsidiary$$s income was earned uniformly thought the year. Subsidiary dividend payments were made quarterly.

$$

BALANCE SHEET

Alpha

Beta

$$

Dec $31,2025$

Dec $31,2025$

Current Assets

$481,000$

$390,000$

Investment in Beta

$?$

$$

Land

$388,000$

$200,000$

Building

$701,000$

$630,000$

Assets

$?$

$1,220,000$

Liabilities

$816,000$

$360,000$

Common stock

$95,000$

$300,000$

APIC

$405,000$

$20,000$

Retained earnings $1/1$

$853,000$

$500,000$

Net Income

$?$

$120,000$

Dividend Paid

$(145,000)$

$(80,000)$

Liabilities $+$ Equity

$?$

$1,220,000$

$$

INCOME STATEMENT

Alpha

Beta

$$

$2025$

$2025$

Revenue

$670,000$

$400,000$

Income in Beta

$?$

$0$

Operating Expenses

$(402,000)$

$(280,000)$

Net income

$?$

$120,000$

$$

$$

Using the information provided above, please answer the following questions:

$1.$ What is the goodwill at the acquisition date?

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$$

$$

$$

$$

$$

$$

$$

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$2.$ What is the proportion of goodwill assigned to NCI?

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$$

$$

$$

$$

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$3.$ What is the ECOBV amortization for $2025?$

$$

$$

$$

$$

$$

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$4.$ What is the balance sheet NCI on December $31,2025?$

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$$

$$

$$

$$

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$5.$ Complete the following consolidation worksheet.

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Accounts

Alpha

Beta

Consolidation Entries

Noncontrolling Interest

Consolidated Totals

Debit

Credit

Revenues

$(670,000)$

$(400,000)$

$$

$$

$$

$$

Operating Expenses

$402,000$

$280,000$

Investment Income

$$

$0$

Separate company net income

$$

$(120,000)$

$$

Consolidated Net Income

$$

$$

Noncontrolling Interest in Beta Income

$$

$$

Net Income to Controlling Interest

$$

$$

$$

$$

Retained Earnings $1/1$

$$

$(853,000)$

$$

$(500,000)$

$$

Net Income $($above$)$

$$

$(120,000)$

Dividend paid

$145,000$

$80,000$

Retained Earnings $12/31$

$$

$(540,000)$

$$

$$

$$

$$

$$

Current Assets

$$

$481,000$

$$

$390,000$

$$

Land

$388,000$

$200,000$

Building

$701,000$

$630,000$

Investment in Beta

$$

$0$

Total Assets

$$

$1,220,000$

$$

Liabilities

$(816,000)$

$(360,000)$

$$

Common Stock

$(95,000)$

$(300,000)$

APIC

$(405,000)$

$(20,000)$

Noncontrolling Interest in Beta $1/1$

$$

$$

$$

$$

$$

Noncontrolling Interest in Beta $12/31$

$$

$$

$(540,000)$

$$

$$

$$

Retained Earnings $12/31$

Total Liabilities and Equities

$$

$(1,220,000)$

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$$

$$

$$

$$

$$

$$

$$

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