Question

***I just need help calculating the Book Value of Atlanta*** I got 913,000 at one point and that was incorrect

On July 1, 2018, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $820,575 in cash and equity securities. The remaining 30 percent of Atlanta’s shares traded closely near an average price that totaled $351,675 both before and after Truman’s acquisition.

In reviewing its acquisition, Truman assigned a $133,000 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.

	Truman				Atlanta
Revenues	$	(714,210	)		$	(509,000	)
Operating expenses		420,000				363,000
Income of subsidiary		(41,790	)			0
Net income	$	(336,000	)		$	(146,000	)
Retained earnings, 1/1/18	$	(898,000	)		$	(583,000	)
Net income (above)		(336,000	)			(146,000	)
Dividends declared		145,000				60,000
Retained earnings, 12/31/18	$	(1,089,000	)		$	(669,000	)
Current assets	$	489,635			$	460,000
Investment in Atlanta		841,365				0
Land		433,000				236,000
Buildings		712,000				678,000
Total assets	$	2,476,000			$	1,374,000
Liabilities	$	(887,000	)		$	(385,000	)
Common stock		(95,000	)			(300,000	)
Additional paid-in capital		(405,000	)			(20,000	)
Retained earnings, 12/31/18		(1,089,000	)			(669,000	)
Total liabilities and stockholders' equity	$	(2,476,000	)		$	(1,374,000	)

1. How did Truman allocate Atlanta’s acquisition-date fair value to the various assets acquired and liabilities assumed in the combination?

Consideration transferred by Truman	820,575
Noncontrolling interest fair value	351,675
Atlanta's acquisition-date total fair value	1,172,250
Book value of Atlanta	???????
Fair Value in excess of book value
Excess fair value assigned
Patent	133,000
Goodwill	(58,750)

Answer 1

Book value of Atlanta (Atlanta common stock + beg.retained earnings + dividends paid after acquisition ) $300,000 + $583,000 + (($60,000/4quarter)x2quarter)

-$913,000