1. Consolidation working paper, intercompany merchandise transactions On January 2, 2017, Palace Shoes acquired 60% of the stock of Sage Footwear. Palace uses the complete equity method to account for its investment in Sage. Sage's assets and liabilities were reported at amounts approximating fair value, except for previously unreported indefinite life identifiable intangible assets valued at $10,000. These intangible assets were impaired by $2,000 during the years 2017-2019 and are impaired by $500 during 2020. The goodwill recognized for this acquisition was $56,500, split between Palace and the noncontrolling interest in a 70:30 ratio. There has been no goodwill impairment during 2017-2019, but testing reveals goodwill impairment of $1,500 in 2020. Sage sells merchandise to Palace (upstream sales) on a regular basis at a 25% markup on cost. Information on sales activities is as follows: Sales price of merchandise sold to Palace in 2020 Merchandise in Palace's 2020 beginning inventory, purchased from Sage, at cost to Palace Merchandise in Palace's 2020 ending inventory, purchased from Sage, at cost to Palace It is now December 31, 2020, four years since the acquisition. The December 31, 2020 trial balances of Palace and Sage appear in the consolidation working paper below. Required: Fill in the working paper above to consolidate the December 31, 2020 trial balances of Palace and Sage. Label the eliminating entries (E), (R), (C), (O), (N) and (I). (Please use parentheses and comma, e.g. (E)123,456; No blanks between (E) and 123,456) Dr (Cr) Dr Cr D r (Cr) Dr (Cr) $3,000 Current assets $ 10,000 Plant assets, net 300,000 85,000 Intangibles Investment in Sage 54,550 Goodwill Liabilities (158,755) (68,450) Capital stock (80,000) (7,500) Retained earnings, beg. (120,000) (8,000) AOCI, beg. (1,000) (500) Noncontrolling interest Sales revenue (125,000) (50,000) Equity in NI of Sage (690) Cost of goods sold 80,000 30,000 Operating expenses 41,000 16,500 (75) (50) Equity in Sage's OCI (30) NCI in net income NCI in OCI Total 0 $ 0 1. Consolidation working paper, intercompany merchandise transactions On January 2, 2017, Palace Shoes acquired 60% of the stock of Sage Footwear. Palace uses the complete equity method to account for its investment in Sage. Sage's assets and liabilities were reported at amounts approximating fair value, except for previously unreported indefinite life identifiable intangible assets valued at $10,000. These intangible assets were impaired by $2,000 during the years 2017-2019 and are impaired by $500 during 2020. The goodwill recognized for this acquisition was $56,500, split between Palace and the noncontrolling interest in a 70:30 ratio. There has been no goodwill impairment during 2017-2019, but testing reveals goodwill impairment of $1,500 in 2020. Sage sells merchandise to Palace (upstream sales) on a regular basis at a 25% markup on cost. Information on sales activities is as follows: Sales price of merchandise sold to Palace in 2020 Merchandise in Palace's 2020 beginning inventory, purchased from Sage, at cost to Palace Merchandise in Palace's 2020 ending inventory, purchased from Sage, at cost to Palace It is now December 31, 2020, four years since the acquisition. The December 31, 2020 trial balances of Palace and Sage appear in the consolidation working paper below. Required: Fill in the working paper above to consolidate the December 31, 2020 trial balances of Palace and Sage. Label the eliminating entries (E), (R), (C), (O), (N) and (I). (Please use parentheses and comma, e.g. (E)123,456; No blanks between (E) and 123,456) Dr (Cr) Dr Cr D r (Cr) Dr (Cr) $3,000 Current assets $ 10,000 Plant assets, net 300,000 85,000 Intangibles Investment in Sage 54,550 Goodwill Liabilities (158,755) (68,450) Capital stock (80,000) (7,500) Retained earnings, beg. (120,000) (8,000) AOCI, beg. (1,000) (500) Noncontrolling interest Sales revenue (125,000) (50,000) Equity in NI of Sage (690) Cost of goods sold 80,000 30,000 Operating expenses 41,000 16,500 (75) (50) Equity in Sage's OCI (30) NCI in net income NCI in OCI Total 0 $ 0