On July 1 2011 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 $100 000 fair value to a patent recently developed by Atlanta even though it was not recorded within the financial records of the subsidiary. This patent is anticipated to have a remaining life of five years.The following financial information is available for these two companies for 2011. In addition the subsidiary’s income was earned uniformly throughout the year. Subsidiary dividend payments were made quarterly.TrumanAtlantaRevenues$ (670 000)$ (400 000)Operating expenses402 000280 000Income of subsidiary(35 000)Net income$ (303 000)$ (120 000)Retained earnings 1/1/11$ (823 000)$ (500 000)Net income (above)(303 000)(120 000)Dividends paid145 00080 000Retained earnings 12/31/11$ (981 000)$ (540 000)Current assets$ 481 000$ 390 000Investment in Atlanta727 000Land388 000200 000Buildings701 000630 000Total assets$ 2 297 000$ 1 220 000Liabilities$ (816 000)$ (360 000)Common stock(95 000)(300 000)Additional paid-in capital(405 000)(20 000)Retained earnings 12/31/11(981 000)(540 000)Total liabilities and stockholders’ equity$(2 297 000)$(1 220 000)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 noncontrolling interests?c. How did Truman derive the Investment in Atlanta account balance at the end of 2011?d. Prepare a worksheet to consolidate the financial statements of these two companies as of December 31 2011.
