Reference no: EM132938040

On January 1, Year 3, First Rate Corp (First) purchased 1,350 common shares of Second Opinion Ltd (Second) for $112,500. On this date, the shareholders' equity accounts of Second were as follows:

Common (ordinary) shares (1,875 shares issued and outstanding) 35000

Preferred shares (5,000 shares issued and outstanding) 65000

Retained earning s70000

170000

The preferred shares have a $1/share dividend rate and are cumulative and non-participating with a liquidation value of $13.50 per share. The dividends were one year in arrears on January 1, Year 3.

The following information pertains to retained earnings for the two companies for Year 3:

                                                                   First        Second

Retained earnings, beginning of the year 146000   70000

Net income                                     52000      24000

Dividends declared and paid              18000      16000

Retained earnings, end of the year   180000      78000

Additional information:

• First uses the cost method to account for its investment in Second
• Any acquisition differential related to patents with an estimated useful life of 5 years as of January 1, Year 3. Neither company has any patents recorded on their separate-entity records.

Required:

Problem a. Prepare a schedule to analyze the purchase and to determine the fair value differential for the patent.

Problem b. Calculate non-controlling interest for the consolidated income statement for Year 3.

Problem c. Calculate the non-controlling interest for the consolidated statement of financial position (balance sheet) at the end of Year 3