Question
Purchase Corporation purchased 60 percent of Steal Company ownership on January 1, 20X7, for $283,500. Steal reported the following net income and dividend payments: Year
Purchase Corporation purchased 60 percent of Steal Company ownership on January 1, 20X7, for $283,500. Steal reported the following net income and dividend payments:
Year Net Income Dividends Paid 20X7 $ 48,000 $ 28,000 20X8 58,000 38,000 20X9 33,000 13,000
On January 1, 20X7, Steal had $256,000 of $10 par value common stock outstanding and retained earnings of $156,000, and the fair value of the noncontrolling interest was $189,000. Steal held land with a book value of $26,500 and a market value of $34,000 and equipment with a book value of $338,000 and a market value of $378,000 at the date of combination. The remainder of the differential at acquisition was attributable to an increase in the value of patents, which had a remaining useful life of 10 years. All depreciable assets held by Steal at the date of acquisition had a remaining economic life of eight years.
Required:
- Compute the increase in the fair value of patents held by Steal.
- Prepare the consolidation entries needed at January 1, 20X7, to prepare a consolidated balance sheet.
Purchase Corporation purchased 60 percent of Steal Company ownership on January 1, 20X7, for $283,500. Steal reported the following net income and dividend payments:
Year | Net Income | Dividends Paid |
---|---|---|
20X7 | $ 48,000 | $ 28,000 |
20X8 | 58,000 | 38,000 |
20X9 | 33,000 | 13,000 |
On January 1, 20X7, Steal had $256,000 of $10 par value common stock outstanding and retained earnings of $156,000, and the fair value of the noncontrolling interest was $189,000. Steal held land with a book value of $26,500 and a market value of $34,000 and equipment with a book value of $338,000 and a market value of $378,000 at the date of combination. The remainder of the differential at acquisition was attributable to an increase in the value of patents, which had a remaining useful life of 10 years. All depreciable assets held by Steal at the date of acquisition had a remaining economic life of eight years.
Required:
- Compute the increase in the fair value of patents held by Steal.
- Prepare the consolidation entries needed at January 1, 20X7, to prepare a consolidated balance sheet.
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