1.On 1/1/2019, Choco Corp. acquired 90% of the voting common stock of Allie Inc. for
$180,000 and the fair value of non-controlling interest (NCI) on acquisition date was
$20,000. There is no control premium for Choco' acquisition of Allie. Following is intra-
entity inventory (downstream) sales between Choco and Allie in 2019 and 2020.
2019
2020
Transfer price
$670,000
$500,000
Historical cost
$603,000
$425,000
% of intra-entity inventory sales
40%
50%
unsold at the end of each year
• On 1/1/2019, Choco allocated the entire $70,000 excess fair value over book value of Allie
as a "Trademark" (with an estimated remaining life of 7 years).
• Choco uses the equity method to account for its investment in Allie.
• Following is net income and dividends information for Choco and Allie in 2019 and 2020.
2019
2020
Choco
Allie
Choco
Allie
Net income
$550,000
$400,000
$650,000
$600,000
Dividends
$220,000
$100,000
$320,000
$120,000
• Book value of Allie's net assets on 1/1/2019 is $130,000.