This paper circulates around the core theme of How did Truman allocate Atlanta’s acquisition-date fair value to the various assets acquired and liabilities assumed in the combination? together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.
On July 1, 2011, Truman Company acquired a 70 percent interest in
Atlanta Company in exchange for consideration of $720,000 in cash and
equity securities. The remaining 30 percent of Atlanta’s shares traded
closely near an average price that totaled $290,000 both before and
after Truman’s acquisition. In reviewing its acquisition, Truman
assigned a $100,000 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 2011. In addition, the subsidiary’s income was earned
uniformly throughout the year. Subsidiary dividend payments were made
quarterly.
|
Truman
|
Atlanta
|
|
Revenues
|
$ (670,000)
|
$ (400,000)
|
|
Operating expenses
|
402,000
|
280,000
|
|
Income of subsidiary
|
(35,000)
|
|
Net income
|
$ (303,000)
|
$ (120,000)
|
|
Retained earnings, 1/1/11
|
$ (823,000)
|
$ (500,000)
|
|
Net income (above)
|
(303,000)
|
(120,000)
|
|
Dividends paid
|
145,000
|
80,000
|
|
Retained earnings, 12/31/11
|
$ (981,000)
|
$ (540,000)
|
|
Current assets
|
$ 481,000
|
$ 390,000
|
|
Investment in Atlanta
|
727,000
|
|
Land
|
388,000
|
200,000
|
|
Buildings
|
701,000
|
630,000
|
|
Total assets
|
$ 2,297,000
|
$ 1,220,000
|
|
Liabilities
|
$ (816,000)
|
$ (360,000)
|
|
Common stock
|
(95,000)
|
(300,000)
|
|
Additional paid-in capital
|
(405,000)
|
(20,000)
|
|
Retained earnings, 12/31/11
|
(981,000)
|
(540,000)
|
|
Total liabilities and stockholders’ equity
|
$(2,297,000)
|
$(1,220,000)
|
Answer each of the following:
a. How did Truman allocate Atlanta’s acquisition-date fair value to
the various assets acquired and liabilities assumed in the combination?
b. How did Truman allocate the goodwill from the acquisition across the controlling and noncontrolling interests?
c. How did Truman derive the Investment in Atlanta account balance at the end of 2011?
d. Prepare a worksheet to consolidate the financial statements of these two companies as of December 31, 2011.
