Chapter_4_day_2_solutions

Chapter_4_day_2_solutions - 21. (40 minutes) (Several...

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Unformatted text preview: 21. (40 minutes) (Several valuation and income determination questions for a business combination involving a noncontrolling interest.) a. Business combinations are recorded generally at the fair value of the consideration transferred by the acquiring firm plus the acquisition-date fair value of the noncontrolling interest. Pattersons consideration transferred ($31.25 80,000 shares).......... $2,500,000 Noncontrolling interest fair value ($30.00 20,000 shares).................. $600,000 Sorianos total fair value 1/1/09............................................................. $3,100,000 b. Each identifiable asset acquired and liability assumed in a business combination should initially be reported at its acquisition-date fair value. c. In periods subsequent to acquisition, the subsidiarys assets and liabilities are reported at their acquisition-date fair values adjusted for amortization and depreciation. Except for certain financial items, they are not continually adjusted for changing fair values. d. Sorianos total fair value 1/1/09............................................................. $3,100,000 Sorianos net assets book value........................................................... 1,290,000 Excess acquisition-date fair value over book value........................... $1,810,000 Adjustments from book to fair values.................................................. Buildings and equipment...................................... (250,000) Trademarks............................................................ 200,000 Patented technology............................................. 1,060,000 Unpatented technology......................................... 600,000 1,610,000 Goodwill ............................................................................................ $ 200,000 e. Combined revenues....................................................................$4,400,000 Combined expenses....................................................................(2,350,000) Building and equipment excess depreciation..........................50,000 Trademark excess amortization.................................................(20,000) Patented technology amortization.......................................................(265,000) Unpatented technology amortization..................................................(200,000 ) Consolidated net income............................................................$1,615,000 To noncontrolling interest: Sorianos revenues................................................................$1,400,000 Sorianos expenses................................................................(600,000) Total excess amortization expenses (above)......................(435,000Total excess amortization expenses (above)....
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Chapter_4_day_2_solutions - 21. (40 minutes) (Several...

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