Equity Method and Eliminating Entries, Second Year

On January 1, 2023, Playtel Inc. acquired all of the stock of San Jose Cable for $350 million in cash. At the date of acquisition, San Joses shareholders equity accounts were as follows (in thousands):

Common stock, $1 par	$7,000
Additional paid-in capital	42,000
Retained deficit	(1,400)
Treasury stock	(700)
Total	$46,900

Both companies have a December 31 year-end. At the date of acquisition, San Joses reported net assets had book values approximating fair value. However, it had previously unreported indefinite-life identifiable intangibles valued at $91 million, meeting ASC Topic 805 requirements for capitalization. Impairment losses in 2023 for identifiable intangibles were $700,000. Goodwill from this acquisition was not impaired in 2023. San Jose reported net income of $4.0 million in 2023, and paid no dividends. Playtel uses the complete equity method to report its investment in San Jose on its own books.

It is now December 31, 2024, two years since the acquisition. In 2024, San Jose reported net income of $4.0 million and declared and paid dividends of $560,000. Impairment losses on the identifiable intangibles were $1.4 million, and goodwill was impaired by $840,000.

Note: Provide all answers in thousands.

a. Calculate equity in net income of San Jose for 2024, reported on Playtels books

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b. Calculate the December 31, 2024, investment balance, reported on Playtels books.

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c. Prepare eliminating entries (C), (E), (R), and (O), required to consolidate Playtels trial balance accounts with those of San Jose on December 31, 2024.