Equity Method and Eliminating Entries, First Year

On July $1,2022,$ Prestige Communications acquired all of the voting stock of Southern Light Technologies for $$300$ million in cash. At the date of acquisition, Southern Light$$s shareholders$$ equity accounts were as follows $($in millions$)$:

Capital stock $$26$

Retained earnings $142$

Accumulated other comprehensive income $5$

Treasury stock $(1)$

Total $$172$

At the date of acquisition, Southern Light$$s inventories and property, plant and equipment had a fair value that was $$2$ million and $$10$ million lower than book value, respectively. It also had previously unreported brand names, valued at $$60$ million, meeting the ASC $805$ criteria for separate capitalization. Southern Light reports inventories using FIFO, its revalued plant and equipment had a $10-$year remaining life, straight$-$line, and the brand names are indefinite$-$lived. Both companies have June $30$ year$-$ends.

Southern Light reported $$20$ million in net income and $$500,000$ in other comprehensive income in fiscal $2023,$ and declared and paid $$2\mathrm{.}5$ million in cash dividends. Impairment testing at the end of fiscal $2023$ reveals that Southern Light$$s brand names are impaired by $$3$ million and goodwill connected with the acquisition is impaired by $$5$ million in $2023.$ Southern Light$$s beginning inventory was sold during fiscal $2023.$

Required

a$.$ Calculate equity in net income of Southern Light, appearing on Prestige Communication$$s books, for fiscal $2023.$ Prestige uses the complete equity method to account for its investment.

Enter answer in thousands $($example: $$20$ million equals $$20,000$ in thousands$).$

$Answer

$0$

$($in thousands$)$

b$.$ Prepare Prestige Communications$$ journal entries during $2023$ to report its investment in Southern Light, on its own books.

Enter all numerical answers in thousands $($example: $$300$ million equals $$300,000($in thousands$).$

Description Debit Credit

Answer

Answer

$0$

Answer

$0$

Answer

Answer

$0$

Answer

$0$

To record acquisition of Southern Light.

Answer

Answer

$0$

Answer

$0$

Equity in net income of Southern Light Answer

$0$

Answer

$0$

Answer

Answer

$0$

Answer

$0$

To record equity in net income.

Answer

Answer

$0$

Answer

$0$

Answer

Answer

$0$

Answer

$0$

To record receipt of dividends.

c$.$ Prepare the consolidation eliminating entries $($C$),($E$),($R$)$ and $($O$),$ required to consolidate Prestige Communications$$ accounts with those of Southern Light Technologies at June $30,2023.$

Enter all numerical answers in thousands $($example: $$2\mathrm{.}5$ million equals $$2,500($in thousands$).$

Ref. Description Debit Credit

$($C$)$ Equity in net income of Southern Light Answer

$0$

Answer

$0$

Answer

Answer

$0$

Answer

$0$

Answer

Answer

$0$

Answer

$0$

Investment in Southern Light

Answer

$0$

Answer

$0$

$($E$)$ Capital stock Answer

$0$

Answer

$0$

Retained earnings Answer

$0$

Answer

$0$

Answer

Answer

$0$

Answer

$0$

Answer

Answer

$0$

Answer

$0$

Investment in Southern Light

Answer

$0$

Answer

$0$

$($R$)$ Brand names Answer

$0$

Answer

$0$

Answer

Answer

$0$

Answer

$0$

Answer

Answer

$0$

Answer

$0$

Plant and equipment, net

Answer

$0$

Answer

$0$

Investment in Southern Light

Answer

$0$

Answer

$0$

$($O$)$ Impairment losses Answer

$0$

Answer

$0$

Plant and equipment, net Answer

$0$

Answer

$0$

Answer

Answer

$0$

Answer

$0$

Answer

Answer

$0$

Answer

$0$

Depreciation expense

Answer

$0$

Answer

$0$

Brand names

Answer

$0$

Answer

$0$

Goodwill

Answer

$0$

Answer

$0$

Mark $0\mathrm{.}00$ out of $1\mathrm{.}00$