On July 1, 2018, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $778,190 in cash and equity securities. The remaining 30 percent of Atlantas shares traded closely near an average price that totaled $333,510 both before and after Trumans acquisition.

In reviewing its acquisition, Truman assigned a $146,500 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 2018. In addition, the subsidiarys income was earned uniformly throughout the year. The subsidiary declared dividends quarterly.

1. How did Truman allocate Atlantas acquisition-date fair value to the various assets acquired and liabilities assumed in the combination?

   

2. How did Truman allocate the goodwill from the acquisition across the controlling and noncontrolling interests?

   

3. How did Truman derive the Investment in Atlanta account balance at the end of 2018?

   

4. Prepare a worksheet to consolidate the financial statements of these two companies as of December 31, 2018. At year-end, there were no intra-entity receivables or payables.

   

$ Revenues Operating expenses Income of subsidiary Atlanta (501,000) 341,000 $ $ Truman $ (781,255) 488,000 (45,745) $ (339,000) $ (890,000) (339,000) 145,000 $ (1,084,000) 428,065 795,935 455,000 779,000 $ 2,458,000 $ (874,000) (95,000) (405,000) (1,084,000) $ (2,458,000) (160,000) (523,000) (160,000) 80,000 (603,000) 398,000 Net income Retained earnings, 1/1/18 Net income (above) Dividends declared Retained earnings, 12/31/18 Current assets Investment in Atlanta Land Buildings Total assets Liabilities Common stock Additional paid-in capital Retained earnings, 12/31/18 Total liabilities and stockholders' equity $ $ 224,000 673,000 $ 1,295,000 $ (372,000) (300,000) (20,000) (603,000) $ (1,295,000) Consideration transferred by Truman Noncontrolling interest fair value Atlanta's acquisition-date total fair value Book value of Atlanta $ 0 Fair value in excess of book value Excess fair value assigned: Patent Goodwill Controlling Noncontrolling Interest Interest Goodwill Initial value at acquisition date Truman's share of Atlanta's net income for half year Dividends 2018 Investment account balance 12/31/18 TRUMAN COMPANY AND SUBSIDIARY ATLANTA COMPANY Consolidation Worksheet For Year Ending December 31, 2018 Truman Atlanta Consolidation Entries Company Company Debit Credit $ (781,255) $ (501,000) 488,000 341,000 (45,745) $ (339,000) $ (160,000) Noncontrolling Consolidated Interest Totals Revenues Operating expenses Net income of subsidiary Separate company net income Consolidated net income Net income attributable to NCI $ Net income attributable to Truman Retained earnings, 1/1 Net income Dividends declared Retained earnings 12/31 $ (890,000) $ (339,000) 145,000 $ (1,084,000) $ (523,000) (160,000) 80,000 (603,000) $ $ $ 398,000 Current assets Investment in Atlanta 428,065 795,935 455,000 779,000 Land 224,000 673,000 $ $ $ $ $ Buildings Patent Goodwill Total assets Liabilities Common stock Additional paid in capital Retained earnings 12/31 Noncontrolling interest 7/1 Noncontrolling interest 12/31 Total liabilities and equity 2,458,000 (874,000) (95,000) (405,000) (1,084,000) 1,295,000 (372,000) (300,000) (20,000) (603,000) $ (2,458,000) $ (1,295,000) $ 0 $ 0