Calculation of Investment Balance, Comprehensive Eliminating Entries, Variety of Intercompany Transactions

Poplar Outdoor Corporation owns 60 percent of the voting stock of Sugg Australia. Date-of-acquisition information is as follows:

• Acquisition cost: $39.5 million
• Fair value of the noncontrolling interest: $20.5 million
• Sugg's book value: $10 million
• Value of unreported acquired indefinite lived trademarks: $15 million.

As of the beginning of the current year, trademarks are impaired by $2 million, and goodwill impairment is $5 million. There is no current year impairment for the trademarks, but current year goodwill impairment is $1 million. Sugg reports net income of $1.5 million for the current year, and declares no dividends. Its total equity at the beginning of the year is $19 million.

Following is information on intercompany transactions between Poplar and Sugg:

• Sugg sold land to Poplar in the current year at a loss of $500,000. Poplar still owns the land.
• Intercompany profit in Poplar's beginning inventory, purchased from Sugg, is $200,000.
• Intercompany profit in Poplar's ending inventory, purchased from Sugg, is $290,000.
• Total sales from Sugg to Poplar, at the price charged to Poplar, were $6 million.
• Poplar sold administrative facilities with a book value of $8 million to Sugg two years ago, at the beginning of the year, for $7 million. The facilities had a remaining life of 10 years, straight-line. Sugg still uses the facilities.

Required

a. Prepare a schedule to compute equity in net income and noncontrolling interest in net income for the current year, assuming Poplar uses the complete equity method.

Instructions:

1. Enter answers in thousands. For example, $900,000 is $900 in thousands and $15 million is $15,000 in thousands.
2. Use negative signs with answers that reduce the net income amounts.

	Equity in NI	Noncontrolling Interest in NI
Sugg reported net income	Answer	Answer
Goodwill impairment loss	Answer	Answer
Intercompany transactions:
Upstream land loss	Answer	Answer
Upstream confirmed profit on beg. inventory	Answer	Answer
Upstream unconfirmed profit on end. inventory	Answer	Answer
Downstream confirmed loss on facilities sale	Answer	Answer
Total	Answer	Answer

b. Compute the investment balance on Poplar's books at the end of the current year.

Instructions:

1. Enter answers in thousands. For example, $900,000 is $900 in thousands and $15 million is $15,000 in thousands.
2. Use negative signs with answers that reduce the investment balance.

Investment original cost	Answer
Change in Sugg's book value to beginning of current year	Answer
Trademark impairment to beginning of current year	Answer
Goodwill impairment to beginning of current year	Answer
Upstream unconfirmed profit on beginning inventory	Answer
Unconfirmed loss on downstream facilities sale	Answer
Investment balance, beginning of current year	Answer
Equity in net income for current year	Answer
Investment balance, end of current year	Answer

c. Prepare the current year eliminating entries (C), (I), (E), (R), (O), and (N), to consolidate the end-of-year trial balances of Poplar and Sugg.

Enter answers in thousands. For example, $900,000 is $900 in thousands and $15 million is $15,000 in thousands.

Consolidation Journal
Ref.	Description	Debit	Credit
(C)	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
(I-1)	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
	To eliminate unconfirmed intercomany loss on sale of land.
(I-2)	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
	To eliminate unconfirmed intercompany profit in beg. inventory.
(I-3)	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
	To eliminate unconfirmed intercompany profit in end. inventory.
(I-4)	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
	To eliminate intercompany sales and purchases.
(I-5)	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
	To eliminate the beg. of year unconfirmed loss on facilities sale.
(I-6)	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
	To adjust depreciation based on original book value.
(E)	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
	Investment in Sugg	Answer	Answer
	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
(R)	Trademarks	Answer	Answer
	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
	Investment in Sugg	Answer	Answer
	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
(O)	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
(N)	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer
	AnswerEquity in net incomeInvestment in SuggLandLoss on sale of landEquity, beginningCost of goods soldInventoriesSales revenueFacilities, netDepreciation expenseFacilities, netNoncontrolling interest in SuggGoodwillGoodwill impairment lossNoncontrolling interest in NI	Answer	Answer