Plaza Hotels acquired a 90 percent interest in Stardust Casinos on January 1, 2017 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-of- acquisition 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 at \($8,000,000.\) Stardust's equity accounts at the date of acquisition were as follows:

Stardust reports net income of \($4,000,000\) and other comprehensive loss of \($10,000\) for 2018. Stardust reported net income of \($2,800,000\) and other comprehensive income of \($25,000\) in 2017. Stardust did not declare any dividends in either year. Goodwill from this acquisition is impaired by \($200,000\) during 2018, but was not impaired in 2017. Plaza Hotels follows U.S. GAAP. 

Required

a. Calculate the original goodwill for this acquisition and its allocation to controlling and non-controlling interests. In what ratio is goodwill allocated between controlling and noncontrolling interests?

b. Prepare the consolidation eliminating entries (E) and (R) at the date of acquisition.

c. Prepare the consolidation eliminating entries (C), (E), (R), (O) and (N) at December 31, 2018. 

Transcribed Image Text:

Capital stock ... Retained earnings Accumulated other comprehensive income. Total...... $ 300,000 1,650,000 50,000 $2,000,000