Question

Equity Method, Eliminating Entries, Several Years After Acquisition Data for Planet Two Communications and its wholly-owned subsidiary, Stage 4 Networks, are given below. Planet Two acquired Stage 4 on January 1, 2013. Planet Two uses the complete equity method to report its investment in Stage 4, and its accounting year ends December 31. (in thousands) Acquisition cost $25,000 Stage 4's shareholders' equity, January 1, 2013 holders' ecuity lanuari 2013 5,000 Stage 4's total reported net income, 2013-2020 10,000 Stage 4's total dividends paid, 2013-2020 3,000 Stage 4's reported net income, 2021 Dividends declared and paid by Stage 4, 2021 100 Allocation of excess of cost over book value to identifiable net assets, at acquisition date: Land (400) Buildings (20-year life, straight-line) (1,000) Identifiable intangibles (5-year life) 4,000 Long-term debt discount (10 years to maturity as of January 1, 2013 200 Goodwill impairment loss 2013-2020 Goodwill impairment loss, 2021 600 300 50 Required a. Calculate the original goodwill reported for this acquisition $ 0 (in thousands) b. Calculate the equity in net income for 2021, reported on Planet Two's books, using the complete equity method. $ 0 (in thousands) C. Calculate the balance in Investment in Stage 4 Networks at December 31, 2021, reported on Planet Two's books. $0 (in thousands)

Answer 1

Refer the below images for the above mentioned questions, in a detailed way of solution with calculations.

Solution : Requirement a calculate the goodwill reported for particulars Amount this acassition : (in thousands) Amant $ 25000 1 (Jooo) 20000 Acquisition cost Book value of Stage 4 Excess of acquisition cost over book value Fair value less book value : (460) 9 Land 1006 ) 4000 $ (2800) 200 Buildings denttiable long-term Goodwill intangibles debt $ 17200 Requirement reported : calculate the planet two's book eajoity using in net income for 2021, the complete cascity method: on (in thousands) Amount Particulars & 600 $ so Stage 4 reported net income Revaluation write nofts: Buldings ($ 1000 & 20 years =450) Long-term debts ($200 + loyears = $ 20) Goodwill impairement Loss Eavity in net income of Stage 4 $ (60) $ 570

Realoirement ©: calculate the balance in December 31, 2001, reported investment on planet in stage 4 two's books a Networks at (in thousands) Armount $ 25000 $ 10000 (3000) Particulars Investment in stage 4, 11113 stage u reported income, 2013-2020 Stage 4 reported dividends 2013-2020 Revolution write off's 2013-2020 Buildings [$ 1000 20x8 years Identifiable intangibles (full balances Long-term debt [1 200 10Jx 8 years Good will impairment loss Investment in stage 4 11/21 Equity in net income, 2020 (part b) Stage u's dividends 2001 investment in Stage 4 12/31/2001 $400 $ (4000) $(160) $(300) $27940 s 970 (100) $ 29410 Requirement @ to consolidate for 2021 Prepare the eliminating entries necessary financial statements of planet two is stage 4 (Amounts in thousands) Credit $5to Debit particolars (C) Ersity in net income of Stage4 Ale To Dividends - stage 4 To Investment in stage 4 $ 400 $470 $12000 Stockholders To eauity - stage 4, 1/1 Ale Dr Investment in stage 4 $12000 Stock holder's easuity, Jan 1, 2021 - & 5ooot & 10000 - 730

in Particulars (Amounts Debits thousands) eredits (R) $400 * Land Are DY Long term debr Alc Dr Goodwill al or 90 Investment in To Buildings, net $40 $16900 stage 4 & 16740 & boo Revaluations at Jan, 1, 2021 = original revaluations Less: Write offs for 2013-2020 Example: Long-term debt = $200 - $ 160 = 1 40 $20 * $ 50 $60 Interest expense ale or Buildings net Ale or Good will impartment has ale or To long-term Debt To Depreciation expense To Goodwill ३२० & so $ 60 von Amants are calculated in part bo