On July 1, 2018, Truman Company acquired a 70 percent interestin Atlanta Company in exchange for consideration of $772,275 incash and equity securities. The remaining 30 percent of Atlanta’sshares traded closely near an average price that totaled $330,975both before and after Truman’s acquisition.
In reviewing its acquisition, Truman assigned a $132,000 fairvalue to a patent recently developed by Atlanta, even though it wasnot recorded within the financial records of the subsidiary. Thispatent is anticipated to have a remaining life of five years.
The following financial information is available for these twocompanies for 2018. In addition, the subsidiary’s income was earneduniformly throughout the year. The subsidiary declared dividendsquarterly.
| Truman | | Atlanta |
| Revenues | $ | (801,490 | ) | | $ | (429,000 | ) |
| Operating expenses | | 454,000 | | | | 304,000 | |
| Income of subsidiary | | (34,510 | ) | | | 0 | |
| Net income | $ | (382,000 | ) | | $ | (125,000 | ) |
| Retained earnings, 1/1/18 | $ | (900,000 | ) | | $ | (537,000 | ) |
| Net income (above) | | (382,000 | ) | | | (125,000 | ) |
| Dividends declared | | 175,000 | | | | 80,000 | |
| Retained earnings, 12/31/18 | $ | (1,107,000 | ) | | $ | (582,000 | ) |
| Current assets | $ | 563,215 | | | $ | 375,000 | |
| Investment in Atlanta | | 778,785 | | | | 0 | |
| Land | | 460,000 | | | | 242,000 | |
| Buildings | | 719,000 | | | | 696,000 | |
| Total assets | $ | 2,521,000 | | | $ | 1,313,000 | |
| Liabilities | $ | (914,000 | ) | | $ | (411,000 | ) |
| Common stock | | (95,000 | ) | | | (300,000 | ) |
| Additional paid-in capital | | (405,000 | ) | | | (20,000 | ) |
| Retained earnings, 12/31/18 | | (1,107,000 | ) | | | (582,000 | ) |
| Total liabilities and stockholders' equity | $ | (2,521,000 | ) | | $ | (1,313,000 | ) |
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How did Truman allocate Atlanta’s acquisition-date fair value tothe various assets acquired and liabilities assumed in thecombination?
How did Truman allocate the goodwill from the acquisition acrossthe controlling and noncontrolling interests?
How did Truman derive the Investment in Atlanta account balanceat the end of 2018?
Prepare a worksheet to consolidate the financial statements ofthese two companies as of December 31, 2018. At year-end, therewere no intra-entity receivables or payables.
