Question
West Company acquired 60 percent of Solar Company for $309,000 when Solars book value was $409,000. The newly comprised 40 percent noncontrolling interest had an
West Company acquired 60 percent of Solar Company for $309,000 when Solars book value was $409,000. The newly comprised 40 percent noncontrolling interest had an assessed fair value of $206,000. Also at the acquisition date, Solar had a trademark (with a 20-year life) that was undervalued in the financial records by $66,000. Also, patented technology (with a 10-year life) was undervalued by $46,000. Two years later, the following figures are reported by these two companies (stockholders equity accounts have been omitted): |
West Company Book Value | Solar Company Book Value | Solar Company Fair Value | ||||||||
Current assets | $ | 626,000 | $ | 306,000 | $ | 326,000 | ||||
Trademarks | 266,000 | 206,000 | 286,000 | |||||||
Patented technology | 416,000 | 156,000 | 156,000 | |||||||
Liabilities | (396,000 | ) | (126,000 | ) | (126,000 | ) | ||||
Revenues | (906,000 | ) | (406,000 | ) | ||||||
Expenses | 494,000 | 306,000 | ||||||||
Investment income | Not given | |||||||||
$534,700. $538,000. $541,300. $531,400. |
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