Consolidation Eliminating Entries Several Years After Acquisition

On January 1, 2019, Palomar Resorts acquired 65 percent of the stock of Sahara Hotel & Casino for $41.45 million in cash and stock. The date-of-acquisition fair value of the noncontrolling interest was $13.55 million. Saharas book value on January 1, 2019, was $4 million, consisting of $2.5 million of capital stock and $1.5 million of retained earnings. An evaluation of Saharas assets and liabilities revealed the following:

Plant and equipment with a book value of $50 million had a fair value of $35 million. Remaining life 20 years, straight-line.

Previously unrecorded favorable lease agreements had a fair value of $5 million. Remaining life 4 years, straight-line.

Gaming licenses with a book value of $1 million had a fair value of $8 million. Remaining life 7 years, straight-line.

Deferred tax liabilities related to the nontaxable acquisition were estimated at $3 million.

It is now December 31, 2023, 5 years since the acquisition. Saharas January 1, 2023 retained earnings balance is $12 million. Goodwill impairment through the end of 2022 is $3.6 million, and goodwill impairment for 2023 is $1 million. Reversals of deferred tax liabilities through the end of 2022 are $2.2 million. During 2023, additional reversals total $300,000. Sahara reported net income of $2.55 million in 2023, and declared and paid $200,000 in dividends.

In your answers below, show amounts in thousands.

Required

a. Calculate goodwill at the date of acquisition, and its allocation to controlling and noncontrolling interests.

Enter answers in thousands ($41.45 million equals $41,450 in thousands).

Total goodwill	Answer
Allocation to controlling interests	Answer
Allocation to noncontrolling interests	Answer

b. Calculate the December 31, 2023 balance for Palomars investment in Sahara, assuming Palomar uses the complete equity method.

Enter answers in thousands ($41.45 million equals $41,450 in thousands).

$Answer

c. Prepare eliminating entries (C), (E), (R), (O) and (N) to consolidate the trial balances of Palomar and Sahara at December 31, 2023.

Enter answers in thousands ($41.45 million equals $41,450 in thousands. $200,000 equals $200 in thousands).

Ref.	Description		Debit	Credit
(C)	AnswerDividendsEquity in net incomeGoodwillGoodwill impairment lossNoncontrolling interestNoncontrolling interest in net incomeRetained earnings		Answer	Answer
	AnswerDividendsEquity in net incomeGoodwillGoodwill impairment lossNoncontrolling interestNoncontrolling interest in net incomeRetained earnings		Answer	Answer
	Investment in Sahara		Answer	Answer
(E)	Capital stock		Answer	Answer
	AnswerDividendsEquity in net incomeGoodwillGoodwill impairment lossNoncontrolling interestNoncontrolling interest in net incomeRetained earnings		Answer	Answer
	Investment in Sahara		Answer	Answer
	AnswerDividendsEquity in net incomeGoodwillGoodwill impairment lossNoncontrolling interestNoncontrolling interest in net incomeRetained earnings		Answer	Answer
(R)	Gaming licenses		Answer	Answer
	AnswerDividendsEquity in net incomeGoodwillGoodwill impairment lossNoncontrolling interestNoncontrolling interest in net incomeRetained earnings		Answer	Answer
	Plant and equipment		Answer	Answer
	Deferred tax liabilities		Answer	Answer
	Investment in Sahara		Answer	Answer
	AnswerDividendsEquity in net incomeGoodwillGoodwill impairment lossNoncontrolling interestNoncontrolling interest in net incomeRetained earnings		Answer	Answer
(O)	Plant and equipment		Answer	Answer
	Deferred tax liabilities		Answer	Answer
	Amortization expense		Answer	Answer
	AnswerDividendsEquity in net incomeGoodwillGoodwill impairment lossNoncontrolling interestNoncontrolling interest in net incomeRetained earnings		Answer	Answer
	Depreciation expense		Answer	Answer
	Tax expense		Answer	Answer
	Gaming licenses		Answer	Answer
	AnswerDividendsEquity in net incomeGoodwillGoodwill impairment lossNoncontrolling interestNoncontrolling interest in net incomeRetained earnings		Answer	Answer
(N)	AnswerDividendsEquity in net incomeGoodwillGoodwill impairment lossNoncontrolling interestNoncontrolling interest in net incomeRetained earnings		Answer	Answer
	AnswerDividendsEquity in net incomeGoodwillGoodwill impairment lossNoncontrolling interestNoncontrolling interest in net incomeRetained earnings		Answer	Answer
	Noncontrolling interest		Answer	Answer