Acquisition Pentland Shoe Company acquired 75 percent of Sketchers Inc.'s common stock on January 2,2011, for $180 million. The fair value of the 25 percent noncontrolling interest was $50 million at the date of acquisition, and Sketchers' book value was $20 million. Sketchers' assets and liabilities were fairly stated, except for previously unreported customer-related intangible assets (five year life, straight-line), capitalized under U.S. GAAP, and valued at $60 million. During the four years following the acquisition, Sketchers reported total net income of $140 million, paid $12 million in dividends, and goodwill was impaired by $5 million. In addition, the following intercompany transactions occurred:
1. During 2011, Sketchers sold land carried on its books at $50 million to Pentland for $80 million. Pentland still holds the land.
2. Early in 2012, Pentland sold a patent recorded at $15 million to Sketchers for $25 million. Sketchers currently holds the patent and is amortizing it over a ten-year period.
3. Over the years since acquisition, total intercompany merchandise sales amounted to $400 million, reflecting an average markup of 40 percent over cost. Unconfirmed intercompany profits in the ending inventories of Pentland and Sketchers at December 31, 2014, are $20 million and $17 million, respectively.
Required
a. Prepare a schedule calculating consolidated retained earnings at December 31, 2014. Pentland's retained earnings from its own operations is $55 million.
b. Pentland uses the complete equity method to account for its investment on its own books. Calculate the balance in the investment account at December 31,2014.
c. Calculate the balance in the noncontrolling interest, appearing in the equity section of the December 31,2014, consolidated balance sheet.