4)

On 1/1/2014, P Company acquires 100% of the voting stock of S, Inc. for $18,000,000 in cash. Some of S assets had fair values that differed from their book values, as follows:

BOOK VALUE FAIR VALUE

Property & Equipment, net (20 remaining life, SL) $11,000,000 $3,000,000

Identifiable intangible assets (5 years, SL) $ 000 $10,000,000

S total stockholders equity at 1/1/2014 was $5,000,000. Now we are at 12/31/2017, four years later. Ss retained earnings, January 1, 2017 reflect the accumulation of net income less dividends. S does not report any AOCI. Cumulative goodwill impairment to the beginning of 2017 is $1,000,000. Additional goodwill impairment of $500,000 was incurred in 2017. P uses the complete equity method to record its investment in S. The trial balance at 12/31/2017 for S appears below.

S,Inc	Debit (Credit)
Current assets	$ 3,500,000
Property & equipment	28,000,000
Current liabilities	(1,500,000)
Noncurrent liabilities	(9,000,000)
Common stock and additional paid-in capital	(2,000,000)
Retained earnings, 1/1/17	(16,500,000)
Sales revenues	(14,500,000)
COGS	8,500,000
Operating expenses	3,500,000

On the 2017 consolidation work paper, eliminating entry (O) increases consolidated operating expenses by:

a) $2,500,000

b) $2,100,000

c) $2,900,000

d) These is none