On July 1, 2013, 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 2013. In addition, the subsidiary's income was earned uniformly throughout the year. Subsidiary dividend payments were made quarterly.

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 2013?
d. Prepare a worksheet to consolidate the financial statements of these two companies as of December 31, 2013.

Transcribed Image Text:

Truman Atlanta Revenues Operating expenses $ (670,000) (400,000) 280,000 402,000 (35,000) _ Net income Retained earnings, 1/1/13 Net income (above Dividends paic. $ (303,000) (120,000) $ (823,000) (500,000) 303,000) 20,000) 80,000 $981,000) (540,000) $ 481,000 390,000 115,) Retained earnings, 12/B1/13 Current assets Investment in Atlanta Land Buildings 727,000 388,000 701,000 630,000 Total assets Liabilities Common stock Additional paid-in capital. Retained earnings, 12B1/13 $2,297000 1,220,000 $ (816,000) (360,000) 95,000) 300,000) (20,000) (405,000) $2,297000)(1,220,000)