Question

#8) On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $45,948. Calvin Co. has one recorded asset, a specialized production machine with a book value of $14,900 and no liabilities. The fair value of the machine is $65,900, and the remaining useful life is estimated to be 10 years. Any remaining excess fair value is attributable to an unrecorded process trade secret with an estimated future life of 4 years. Calvin’s total acquisition date fair value is $76,580.

At the end of the year, Calvin reports the following in its financial statements:

Revenues	$	64,800		Machine	$	13,410		Common stock	$	10,000
Expenses		33,900		Other assets		22,490		Retained earnings		25,900
Net income	$	30,900		Total assets	$	35,900		Total equity	$	35,900
Dividends paid	$	5,000

Determine the amounts that Beckman should report in its year-end consolidated financial statements for noncontrolling interest in subsidiary income, noncontrolling interest, Calvin’s machine (net of accumulated depreciation), and the process trade secret.

	AMOUNT
NONCONTROLLING INTEREST IN SUBSIDARY INCOME
TOTAL NONCONTROLLING INTEREST
CALVINS MACHINE (NET ACUMULATED DEPRECIATION)
PROCESS TRADE SECRET

Please show calculations; thanks.

Answer 1

Determine the amounts to be reported in the year-end consolidated financial statements for noncontrolling interest in subsidiary income, noncontrolling interest, machine (net of accumulated depreciation), and the process trade secret, in the following manner: Amount $76,580 $14,900 ($14,900 $61,680 Description Total acquisition date fair value Book value of a specialized production ess: machine Excess of fair value over book value Allocation: To machine [$65,900 - $14,900] To process trade secret [plug] $51,000 $10,680 $61,680

Amount $64,800 ess: ($41,670) $23,130 Description |Non-controlling interest in subsidiary income Revenues Expenses [$33,900 + $5,100 + $2,6701 Non-controlling interest in subsidiary income $23,130 x 40%] Description Depreciation on machine [$51,000 = 10 years] Amortization of process trade secret $10,680 = 4 years 89,252 Amount $5,100 $2,670 Amount $30,632 Description Year-end Non-controlling interest: Beginning balance [$76,580 x 40%] Non-controlling interest in subsidiary Add: income Dividends paid $5,000 40%] Year-end Non-controlling interest $9,252 Less: ($2,000) $37,884 $37,884

Amount $13,410 $51,000 Description Book value of machine Add: Excess allocation Depreciation of a specialized production machine Machine (net) ess: ($5,100) $59,310 $59,310 Amount $0 $10,680 Description Book value of trade secret Add: Excess allocation Depreciation of a specialized production machine Process trade secret (net) Less: ($2,670) $8,010 $8,010