West Company acquired 60 percent of Solar Company for $300,000 when Solar’s book value was $400,000. The newly comprised 40 percent noncontrolling interest had an assessed fair value of $200,000. Also at the acquisition date, Solar had a trademark (with a 10 year life) that was undervalued in the financial records by $60,000. Also, patented technology (with a 5 year life) was undervalued by $40,000. Two years later, the following figures are reported by these two companies (stockholders’ equity accounts have been omitted):
|
West Company |
Solar Company |
Solar Company |
|
|
Current assets |
$620,000 |
$300,000 |
$320,000 |
|
Trademarks |
260,000 |
200,000 |
280,000 |
|
Patented technology |
410,000 |
150,000 |
150,000 |
|
Liabilities |
390,000 |
120,000 |
120,000 |
|
Revenues |
900,000 |
400,000 |
|
|
Expenses |
500,000 |
300,000 |
|
|
Investment income |
Not given |