Question

Parker, Inc., acquires 70 percent of Sawyer Company for $420,000. The remaining 30 percent of Sawyer’s outstanding shares continue to trade at a collective value of $174,000. On the acquisition date, Sawyer has the following accounts:

	Book Value				Fair Value
Current assets	$	210,000			$	210,000
Land		170,000				180,000
Buildings		300,000				330,000
Liabilities		(280,000	)			(280,000	)

The buildings have a 10-year remaining life. In addition, Sawyer holds a patent worth $140,000 that has a five-year remaining life but is not recorded on its financial records. At the end of the year, the two companies report the following balances:

	Parker			Sawyer
Revenues	$	(900,000	)	$	(600,000	)
Expenses		600,000			400,000

1. Assume that the acquisition took place on January 1. What figures would appear in a consolidated income statement for this year?

2. Assume that the acquisition took place on April 1. Sawyer’s revenues and expenses occurred uniformly throughout the year. What amounts would appear in a consolidated income statement for this year?

a. January 1 b. April 1 Combined revenues Combined expenses Consolidated net income Net income attributable to noncontrolling interest Net income attributable to Parker, Inc.

Answer 1

page:ol Answert Required a con solidated income statement , patent 140,000 acquisition -date total fair value $ 594000 Book value of net aisets 1400,000) fair value in excess of book value $194000 | Annual excess fries fair value assigned to life Amortizations 5 years $28,000 land | Buildings to years 3000 14,000 I Tohal $31000 consolidated figures following january, acquisition date 10,000 30,000 good will 1,500,000 4031,000 combined revenues combined expenses consolidated net income. Ncl in Sarsyet's income ([200,000 - 31,000) *304.) | controlling interest in consolidated net income: 469,000 150,700) $418,300

consolidated figures following Apsuil I acquisition page :02. date - .combined seventies (1) $ 1350,000 combined expenses (0) 1923,250) consolidated net income {496750 non controlling interest in subsidiary income. (3) (38025) Iconbolling interest in consolidated net income. $388435 () $ 900,000 parken revenues plus $ 450,000 i post - acquisition sawyer sievonues () $ 600,000 parkers expenses ples ¢ 300,000 d post -acquisition sauyen explenses plees $ 23, 250 amortization expenses for a months (3) ($ 200,000 - 31,000) adjusted subsidiary income x 3017. x 344 gear 1a.jonuary' b. Aprill combined revenues 1500,000 $1350,000 combined expenses 1031,000923,850 consolidated set income 469000 $ 496.750 interest net income attributable to non confolling 50700 38025 Landet income allributable to parker, inc. $418300 $388725 did toov