70.2K

Verified Solution

Link Copied!

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

Answer & Explanation Solved by verified expert

See Answer