On the 2017 consolidated working paper, eliminating entry (R) reduces Investment in Salem by a. ($3,100,000)

Question:

On the 2017 consolidated working paper, eliminating entry (R) reduces Investment in Salem by

a. $$3,100,000$

b. $$5,200,000 $

c. $$6,400,000 $

d. $$8,000,000 $

On January 1, 2014, Portland Company acquired all of Salem Company’s voting stock for $$16,000,000in$ cash. Some of Salem’s assets and liabilities at the date of purchase had fair values that differed from reported values, as follows:

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Salem’s total stockholders’ equity at January 1, 2014, was $$4,000,000.$ It is now December 31, 2017 (four years later). Salem’s retained earnings reflect the accumulation of net income less dividends; there have been no other changes in its retained earnings. Salem does not report any other comprehensive income.
Cumulative goodwill impairment to the beginning of 2017 is $$2,000,000,$ Goodwill impairment for 2017 is $$500,000.$ Portland uses the complete equity method to account for its investment. The December 31, 2017, trial balance for Salem appears below.

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