Question
On January 1, 2021, Ackerman Company acquires 80% of Seidel Company for $1,712,000 in cash consideration. The remaining 20 percent noncontrolling interest shares had an
On January 1, 2021, Ackerman Company acquires 80% of Seidel Company for $1,712,000 in cash consideration. The remaining 20 percent noncontrolling interest shares had an acquisition-date estimated fair value of $428,000. Seidels acquisition-date total book value was $1,700,000.
The fair value of Seidels recorded assets and liabilities equaled their carrying amounts. However, Seidel had two unrecorded assetsa trademark with an indefinite life and estimated fair value of $245,000 and several customer relationships estimated to be worth $180,000 with four-year remaining lives. Any remaining acquisition-date fair value in the Seidel acquisition was considered goodwill.
During 2021, Seidel reported $172,000 net income and declared and paid dividends totaling $50,000. Also in 2021, Ackerman reported $350,000 net income, but neither declared nor paid dividends.
a) Calculate the annual amortization associated with this acquistiton
b) | The parent Ackerman will consolidate 100% of the assets and liabilities of Seidel since it controls them | |||
through its 80% ownership. | ||||
To balance the consolidated books, a line item for the noncontrolling interest of 20% must be included in | ||||
consolidated stockholders' equity. | ||||
Let's analyze the balance in this new equity account as of 12/31/21. Fill in the amounts indicated. | ||||
- | + | |||
Noncontrolling Interest | ||||
Beginning balance at 1/1/21: remember that | ||||
the acquisition method calls for fair value for all | ||||
aspects of the transaction at the acquisition date. | ||||
The NCI's share of the subsidiary's net income | ||||
The NCI's share of amortization related to | ||||
this subsidiary | ||||
The NCI's share of the dividends declared by | ||||
the subsidiary | ||||
Ending balance at 12/31/21: notice that this | ||||
account's activity parallels that of the parent's | ||||
investment account when the equity method is | ||||
used. | ||||
Format Painter BIU - A 32Merge & Center - $ . % * Conditional Format as Check Cell Formatting Table Clipboard Font Alignment Number 1 B C D Problem 22 (Ch 4), pages 196-197 adapted E 14th ed. Ackerman Co. acquires 80% of Seidel Co. This took place on 1/1/21. Ackerman paid $1,712,000 in cash consideration. The remaining 20% noncontrolling interest shares had an acquisition-date estimated fair value of $428,000. Seidel's acquisition-date total book value was $1,700,000. The fair value of Seidel's recorded assets and liabilities equaled their carrying amounts. However, Seidel lud two unrecorded assets -- a trademark with an indefinite life and estimated fair value of $245,000 and several customer relationships estimated to be worth $180,000 with four-year remaining lives. Any remaining acquisition date fair value in the Seidel acquisition was considered goodwill. During 2021, Seidel reported $172,000 net income and declared and paid dividends totaling $50,000. Also in 2021, Ackerman reported $350,000 net income, but neither declared nor paid dividends. Required: Calculate the annual amortization associated with this acquisition. P4-22 1 b) The parent Ackerman will consolidate 100% of the assets and liabilities of Seidel since it controls them through its 80% ownership. To balance the consolidated books, a line item for the non controlling interest of 20% must be included in consolidated stockholders' equity. Let's analyze the balance in this new equity account as of 12/31/21. Fill in the amounts indicated. + Noncontrolling Interest Beginning balance at 1/1/21: remember that the acquisition method calls for fair value for all aspects of the transaction at the acquisition date. 4 7 8 The NCI's share of the subsidiary's net income The NCI's share of amortization related to this subsidiary 9 0 -1 2 3 The NCI's share of the dividends declared by the subsidiary 55 56 57 Ending balance at 12/31/21: notice that this account's activity parallels that of the parent's investment account when the equity method is used 59 GO P4 22
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