Goodwill, Equity Method, Eliminating Entries, First Year
On January 1, 2020, Playtel Inc. acquired 75 percent of the stock of San Jose Cable for $200 million in cash. At the date of acquisition, the fair value of the noncontrolling interest was $50 million, and Playtel’s shareholders’ equity accounts were as follows (in thousands):
Common stock, $1 par | $5,000 |
Additional paid-in capital | 25,000 |
Retained deficit | (1,000) |
Treasury stock | (800) |
Total | $28,200 |
Both companies have a December 31 year-end. At the date of acquisition, San Jose’s reported net assets had book values approximating fair value. However, it had previously unreported indefinite-life identifiable intangibles valued at $50 million, meeting ASC Topic 805 requirements for capitalization. Impairment losses in 2020 for identifiable intangibles were $1 million. Goodwill from this acquisition was not impaired in 2020. San Jose reported net income of $4 million in 2020, and paid no dividends. Playtel uses the complete equity method to report its investment in San Jose on its own books.
Required
a. Calculate the original amount of goodwill for this acquisition and its allocation to the controlling and noncontrolling interest (in thousands).
Total goodwill | $Answer |
Allocation to controlling interests | $Answer |
Allocation to noncontrolling interests | $Answer |
b. Calculate equity in net income of San Jose, reported on Playtel’s books in 2020, and noncontrolling interest in net income, reported on the consolidated income statement (in thousands).
Use negative signs with answers that reduce net income amounts.
Total | Equity in NI | Noncontrolling Interest in NI |
||
---|---|---|---|---|
San Jose's reported net income | $Answer | $Answer | $Answer | |
Revaluation write-offs: | ||||
Identifiable intangibles impairment | Answer | Answer | Answer | |
$Answer | $Answer | $Answer |
c. Prepare eliminating entries (C), (E), (R), (O) and (N), required to consolidate Playtel’s trial balance accounts with those of San Jose on December 31, 2020 (in thousands).
Ref. | Description | Debit | Credit | |
---|---|---|---|---|
(C) | AnswerAdditional paid-in capitalEquity in net income of San JoseGoodwillIdentifiable intangiblesImpairment lossesInvestment in San JoseNoncontrolling interest in net incomeNoncontrolling interest in San JoseRetained deficit | Answer | Answer | |
AnswerAdditional paid-in capitalEquity in net income of San JoseGoodwillIdentifiable intangiblesImpairment lossesInvestment in San JoseNoncontrolling interest in net incomeNoncontrolling interest in San JoseRetained deficit |
Answer | Answer | ||
(E) | Common stock | Answer | Answer | |
AnswerAdditional paid-in capitalEquity in net income of San JoseGoodwillIdentifiable intangiblesImpairment lossesInvestment in San JoseNoncontrolling interest in net incomeNoncontrolling interest in San JoseRetained deficit | Answer | Answer | ||
AnswerAdditional paid-in capitalEquity in net income of San JoseGoodwillIdentifiable intangiblesImpairment lossesInvestment in San JoseNoncontrolling interest in net incomeNoncontrolling interest in San JoseRetained deficit |
Answer | Answer | ||
Treasury stock |
Answer | Answer | ||
Investment in San Jose |
Answer | Answer | ||
Noncontrolling interest in San Jose |
Answer | Answer | ||
(R) | Identifiable intangibles | Answer | Answer | |
AnswerAdditional paid-in capitalEquity in net income of San JoseGoodwillIdentifiable intangiblesImpairment lossesInvestment in San JoseNoncontrolling interest in net incomeNoncontrolling interest in San JoseRetained deficit | Answer | Answer | ||
Investment in San Jose |
Answer | Answer | ||
AnswerAdditional paid-in capitalEquity in net income of San JoseGoodwillIdentifiable intangiblesImpairment lossesInvestment in San JoseNoncontrolling interest in net incomeNoncontrolling interest in San JoseRetained deficit |
Answer | Answer | ||
(O) | AnswerAdditional paid-in capitalEquity in net income of San JoseGoodwillIdentifiable intangiblesImpairment lossesInvestment in San JoseNoncontrolling interest in net incomeNoncontrolling interest in San JoseRetained deficit | Answer | Answer | |
AnswerAdditional paid-in capitalEquity in net income of San JoseGoodwillIdentifiable intangiblesImpairment lossesInvestment in San JoseNoncontrolling interest in net incomeNoncontrolling interest in San JoseRetained deficit |
Answer | Answer | ||
(N) | AnswerAdditional paid-in capitalEquity in net income of San JoseGoodwillIdentifiable intangiblesImpairment lossesInvestment in San JoseNoncontrolling interest in net incomeNoncontrolling interest in San JoseRetained deficit | Answer | Answer | |
AnswerAdditional paid-in capitalEquity in net income of San JoseGoodwillIdentifiable intangiblesImpairment lossesInvestment in San JoseNoncontrolling interest in net incomeNoncontrolling interest in San JoseRetained deficit |
Answer | Answer |
Goodwill, Equity Method, Eliminating Entries, First Year On January 1, 2020, Playtel Inc. acquired 75 percent...
Please show all work. E5.7 Goodwill, Equity Method, Eliminating Entries. First Year (see related E4.3) On January Goodw ZU20, Playtel Inc, acquired 75 percent of the stock of San Jose Cable for $200 million in cash. At of acquisition, the fair value of the noncontrolling interest was $50 million, and Playtel's Shalen equity accounts were as follows (in thousands): Common stock, $1 par....... Additional paid-in capital..... Retained deficit ......... Treasury stock ................... Total ................ $ 5,000 25,000 (1,000) (800) $28,200...
Consolidation Eliminating Entries, Date of Acquisition and Two Years Later Plaza Hotels acquired a 90 percent interest in Stardust Casinos on January 1, 2020 for $51,100,000. The fair value of the 10 percent noncontrolling interest at the date of acquisition was $2,900,000. Stardust's date-ofacquisition reported net assets were carried at amounts approximating fair value, except for these items: • Plant and equipment, 10-year life, straight-line, is overvalued by $6,000,000. • Previously unrecorded limited-life identifiable intangibles, 4-year life, straight-line, were valued...
Consolidation Eliminating Entries, Date of Acquisition and Two Years Later Plaza Hotels acquired a 90 percent interest in Stardust Casinos on January 1, 2020 for $51,100,000. The fair value of the 10 percent noncontrolling interest at the date of acquisition was $2,900,000. Stardust's date-ofacquisition reported net assets were carried at amounts approximating fair value, except for these items - Plant and equipment, 10-year life, straight-line, is overvalued by $6,000,000 - Previously unrecorded limited-life identifiable intangibles, 4-year life, straight-line, were valued...
Equity Method, Eliminating Entries, Several Years After Acquisition Data for Planet Two Communications and its wholly-owned subsidiary, Stage 4 Networks, are given below. PlanetTwo acquired Stage 4 on January 1, 2013. PlanetTwo 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 5,000 Stage 4's total reported net income, 2013-2020 10,000 Stage 4's total dividends paid, 2013-2020 3,000 Stage...
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...
7. The following information pertains to questions 7-14 On January 1, 2019, Pali Company acquired 75% of Silicon Company's voting stock for $44,300 in cash. The noncontrolling interest had an estimated fair value of $12,700. Silicon's assets and liabilities at the date of acquisition were reported at amounts approximating fair value, but it had previously unreported indefinite life identifiable intangibles valued at $21,000. Silicon's total shareholders' equity at January 1, 2019 was as follows: Capital stock Retained earnings Accumulated other...
E4.14 Help please Equity Method Income and Working Paper Eliminations Pace acquired Saber on January 1, 2019, attributing its $200 million excess of acquisition cost over book value to identifiable intangible assets valued at $40 million, with a 5-year life, and to goodwill. At that time Saber’s shareholders’ equity was $2,000 million. It is now December 31, 2020, and consolidation entries are prepared. The investment account balance on January 1, 2020 was $2,286 million. Saber reported net income of $150...
E4.5 Help Please! Thank you! Acquisition Cost, Equity Method, Eliminating Entries, Second Year Peak Entertainment LO acquires all of the stock of Saddlestone Inc. on January 1,2020. In preparing to consolidate the trial bal- ances of Peak and Saddlestone at December 31, 2021 (two years after the acquisition), you assemble the following information Date-of-acquisition information: Value of stock given up to acquire Saddlestone: $20,000,000 Direct merger costs: $250,000 Saddlestone's shareholders' equity: $7,200,000, consisting of capital stock, $2,000,000; retained earn- ings,...
E4.5 Acquisition Cost, Equity Method, Eliminating Entries, Second Year Peak Entertainment LO 1, 2, 4 acquires all of the stock of Saddlestone Inc. on January 1, 2020. In preparing to consolidate the trial bal- ances of Peak and Saddlestone at December 31, 2021 (two years after the acquisition), you assemble the following information: Date-of-acquisition information: • Value of stock given up to acquire Saddlestone: $20,000,000. • Direct merger costs: $250,000. • Saddlestone's shareholders' equity: $7,200,000, consisting of capital stock, $2,000,000;...
On January 1, 2019, Pali Company acquired 75% of Silicon Company's voting stock for $44,300 in cash. The noncontrolling interest had an estimated fair value of $12,700. Silicon's assets and liabilities at the date of acquisition were reported at amounts approximating fair value, but it had previously unreported indefinite life identifiable intangibles valued at $21,000. Silicon's total shareholders' equity at January 1, 2019 was as follows: Capital stock $ 2,000 Retained earnings 2,900 Accumulated other comprehensive income 100 Total $...