Reference no: EM132693659
Question -
1. On January 1, 2019, UCLA Corporation acquired all of the outstanding stock of USC Corporation in exchange for $6,000,000. The purpose of the acquisition was, in part, to utilize certain technology and software which USC Corporation had pirated from its competitors. For reasons absolutely no one could understand, UCLA Corporation determined not to liquidate USC Corporation and both corporations remained in existence.
2. UCLA uses the equity method. Both corporations have calendar year books and records.
3. At the date of acquisition, USC's stockholders' equity was $2,500,000. (included in the $2.50,000 was retained earnings of $1,700,000.
4. In reviewing fair market value at the time of the acquisition, UCLA Corporation determined the following about the fair market values of USC:
|
Asset
|
Book Value
|
FMV
|
Remaining Useful Life
|
|
Patented Technology
|
$140,000
|
$2,240000
|
7 Years
|
|
Computer Software
|
$60,000
|
$1,260,000
|
12 Years
|
1. During the next three years, USC Corporation reported the following income and dividends:
|
Year
|
Net Income
|
Dividends
|
|
2019
|
$900,000
|
$150,000
|
|
2020
|
$940,000
|
$150,000
|
|
2021
|
$975,000
|
$150,000
|
1. The December 31, 2021 financial statements for both UCLA Corporation and USC Corporation are on the following page.
Requirements - On the four answer opportunities provided:
1. Construct UCLA's acquisition date fair market allocation schedule.
2. Show the underlying calculations that were used by UCLA Corporation to calculate Equity Earnings in USC Corporation at December 31, 2021 as shown in UCLA Corporation's income statement ($575,000).
3. Show the underlying calculations that were used by UCLA Corporation to calculate Investment in USC Corporation at December 31, 2021 as shown in UCLA Corporation's balance sheet ($7,165,000).
4. Prepare the appropriate worksheet for UCLA's consolidated financial statements.