Solved: On July 1 2018 Truman Company acquired a 70

percent

On July 1, 2018, Truman Company acquired a 70 percent interest in Atlanta Company in

exchange for consideration of $720,000 in cash and equity securities. The remaining 30 percent
of Atlanta's shares traded closely near an average price that totaled $290,000 both before and
after Truman's acquisition.

In reviewing its acquisition, Truman assigned a $100,000 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
subsidiary's income was earned uniformly throughout the year. The subsidiary declared
dividends quarterly.

Answer each of the following:

a. How did Truman allocate Atlanta's acquisition-date fair value to the various assets acquired
and liabilities assumed in the combination?

b. How did Truman allocate the goodwill from the acquisition across the controlling and non-
controlling interests?

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

d. 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.

On July 1 2018 Truman Company acquired a 70 percent

ANSWER
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