Reference no: EM132476636

Question - On January 1, 2018, Pepper Enterprise acquired 80% of Harlan Company's outstanding common shares in exchange for $5,000,000 in cash. The priced paid for the 80% ownership interest was proportionately representative of the fair value of all of Harlan's shares.

At acquisition date, Harlan's book value was $5,000,000. The recorded assets and liabilities had fair values equal to their individual book values except that a building (10-year life) with a book value of $600,000 had an appraised value of $1,000,000. Also, at acquisition date, Harlan held patents (10-year life) with a fair value of $600,000 that were not recorded on its books. Any remaining excess fair value was attributed to Goodwill.

For 2018 Pepper reported net income of $925,000 (before recognition of any income from Harlan) and Harlan separately reported earnings of $275,000. During 2018, Pepper paid dividends of $185,000 and Harlan paid $125,000 in dividends.

Compute the amounts that Pepper Enterprises should report in its December 31, 2018 consolidated financial statements for the following items:

Fair value analysis:

a. Harlan's Patents

b. Harlan's Building

c. Controlling interest in consolidated Net Income

d. Noncontrolling interest in consolidated Net Income

e. Noncontrolling interest