Assume, on January 1, 2016, a parent company acquired an 80% interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was $780,000 over the book value of the subsidiary’s Stockholders’ Equity on the acquisition date. The parent assigned the excess fair value to the following [A] assets: [A] Asset Initial Useful
Fair Value Life (years)
Property, plant and equipment (PPE), net $312,000 20
Patent 130,000 10
Customer list 78,000 10
Goodwill 260,000 Indefinite$780,000
80% of the Goodwill is allocated to the parent. The parent and the subsidiary report the following financial statements at December 31, 2019:
Parent Subsidiary Parent Subsidiary
Income statement: Balance sheet:
Sales $10,790,000 $1,560,000 Cash $520,000 $370,500
Cost of goods sold (8,190,000) (780,000) Accounts receivable
780,000 325,000
Gross profit 2,600,000 780,000 Inventory 1,170,000 429,000
Income (loss) from subsidiary 230,880 Equity investment 1,490,320
Operating expenses (2,080,000) (455,000) Property, plant and equipment
(PPE), net 2,600,000 1,170,000
Net income $750,880 $325,000 $6,560,320 $2,294,500
Statement of retained earnings:
BOY retained earnings $713,440 $760,500 Liabilities and stockholders’ equity
Net income 750,880 325,000 Current liabilities $1,170,000 $325,000
Dividends (234,000) (65,000)Long-term liabilities 2,600,000 741,000
EOY retained earnings $1,230,320 $1,020,500 Common stock 520,000 91,000
APIC 1,040,000 117,000
Retained earnings 1,230,320 1,020,500
$6,560,320 $2,294,500
Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP.