1. Peppard acquires 90% of the voting stock of Schultz on January 1, 2020 for $5,000. The fair value of the noncontrolling interest is $550. Schultzs equity is reported at $4,800 at the date of acquisition. Its net assets are reported at amounts approximating fair value, but it has previously unreported identifiable intangible assets (5-year life, straight-line), valued at $1,000. Peppard uses the complete equity method to account for its investment. Schultz reports net income of $300 for 2020.

REQUIRED: What is meant by non-controlling interest? What journal entry does Peppard record on its books for its investment in Schultz?

2. A merger on January 1, 2021 generates goodwill of $50,000,000, which is properly allocated to three divisions of the organization. At the end of 2021, the following information is available:

	Division 1	Division 2	Division 3
January 1, 2021 balance of goodwill	$ 30,000,000	$ 15,000,000	$ 5,000,000
Fair value of division	65,000,000	44,000,000	15,000,000
Book value of division	70,000,000	43,000,000	17,000,000

Due to a downturn in the economy in 2021, it is more likely than not that goodwill is impaired in all three divisions.

REQUIRED: Which divisions (if any) have impaired goodwill? Explain (be specific).

3.

On January 1, 2018, Prachyl Company acquired 100% of Smith Companys voting stock for $20,000 in cash. Smiths total shareholders equity at January 1, 2018 was $5,000. Some of Smiths assets and liabilities at the date of acquisition had fair values that were different from reported values, as follows:

	Book Value	Fair Value
Plant assets, net (10 years, straight-line)	$15,000	$ 10,000
Identifiable intangibles (indefinite life)	0	9,000

It is now December 31, 2020 (3 years later). Impairment of recognized identifiable intangibles totals $400 for 2018 and 2019, and there is no impairment in 2020. There is no goodwill impairment as of the beginning of 2020, but goodwill impairment for 2020 is $1,200. Prachyl uses the complete equity method to account for its investment. December 31, 2020 trial balances for Prachyl and Smith follow:

	Prachyl Dr (Cr)	Smith Dr (Cr)
Current assets	$ 5,000	$ 2,500
Plant assets, net	28,700	22,000
Identifiable intangibles
Investment in Smith	28,400
Goodwill
Liabilities	(20,300)	(11,000)
Capital stock	(15,000)	(2,000)
Retained earnings, beginning	(25,000)	(10,000)
Sales revenue	(25,000)	(14,000)
Equity in net income of Smith	(800)
Cost of goods sold	20,000	9,000
Operating expenses	4,000	3,500
	$ 0	$ 0

The total Goodwill generated as a result of this acquisition was $11,000.

REQUIRED:

Prepare the C, E, R and O eliminating entries for 2020.