On July 1, 2015, 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 Atlantaâs shares traded closely near an average price that totaled $290,000 both before and after Trumanâs 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 2015. In addition, the subsidiaryâs income was earned uniformly throughout the year. The subsidiary declared dividends quarterly.
Answer each of the following:
a. How did Truman allocate Atlantaâs 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 2015?
d. Prepare a worksheet to consolidate the financial statements of these two companies as of December 31, 2015. At year-end, there were no intra-entity receivables orpayables.