Question - JMR Inc. just purchased 85% of ASJ Ltd. for $840,000 cash. All of ASJ's net identifiable assets of $625,000 are equal to their fair values except for the following:
i) Machinery and equipment with a book value of $625,000 and a fair value of $125,000 in excess of book value.
ii) ASJ has a patent, not currently on its books. The cash flows from the patent are expected to be $40,000 per year for the next 8 years, and JMR believes that 5% is an adequate discount rate.
JMR has determined that it will calculate any non-controlling interest based on its proportionate share of ASJ's fair value.
What should be recorded as the fair value of ASJ's assets acquired by JMR (rounded to the nearest thousand dollars)?