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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

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: $31.6 million
  • Fair value of the noncontrolling interest: $16.4 million
  • Sugg's book value: $8 million
  • Value of unreported acquired indefinite lived trademarks: $12 million.

As of the beginning of the current year, trademarks are impaired by $1.6 million, and goodwill impairment is $4 million. There is no current year impairment for the trademarks, but current year goodwill impairment is $800,000. Sugg reports net income of $1.2 million for the current year, and declares no dividends. Its total equity at the beginning of the year is $15.2 million.

Following is information on intercompany transactions between Poplar and Sugg:

  • Sugg sold land to Poplar in the current year at a loss of $400,000. Poplar still owns the land.
  • Intercompany profit in Poplar's beginning inventory, purchased from Sugg, is $160,000.
  • Intercompany profit in Poplar's ending inventory, purchased from Sugg, is $220,000.
  • Total sales from Sugg to Poplar, at the price charged to Poplar, were $4.8 million.
  • Poplar sold administrative facilities with a book value of $6.4 million to Sugg two years ago, at the beginning of the year, for $5.6 million. The facilities had a remaining life of 10 years, straight-line. Sugg still uses the facilities.

Required

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. 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

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