Equity Method Income and Working Paper Eliminations

Pace acquired Saber on January 1, 2019, attributing its $200 million excess of acquisition cost over book value to identifiable intangible assets valued at $40 million, with a 5-year life, and to goodwill. At that time Sabers shareholders equity was $2,000 million. It is now December 31, 2020, and consolidation entries are prepared. The investment account balance on January 1, 2020 was $2,286 million. Saber reported net income of $150 million in 2020. Goodwill is not impaired in either year.

Required

a. What was Sabers 2019 reported net income?

$Answer

million

b. What was Sabers shareholders equity on January 1, 2020?

$Answer

million

c. Calculate Paces equity in net income of Saber for 2020, using the complete equity method.

$Answer

million

d. Prepare the eliminating entries needed to consolidate Pace and Saber at December 31, 2020.

Enter answers in millions.

Ref.	Description		Debit	Credit
(C)	AnswerAmortization expenseEquity in net income of SaberIdentifiable intangiblesInvestment in SaberShareholders' equity-SaberNo entry		Answer	Answer
	AnswerAmortization expenseEquity in net income of SaberIdentifiable intangiblesInvestment in SaberShareholders' equity-SaberNo entry		Answer	Answer
(E)	AnswerAmortization expenseEquity in net income of SaberIdentifiable intangiblesInvestment in SaberShareholders' equity-SaberNo entry		Answer	Answer
	AnswerAmortization expenseEquity in net income of SaberIdentifiable intangiblesInvestment in SaberShareholders' equity-SaberNo entry		Answer	Answer
(R)	Goodwill		Answer	Answer
	AnswerAmortization expenseEquity in net income of SaberIdentifiable intangiblesInvestment in SaberShareholders' equity-SaberNo entry		Answer	Answer
	AnswerAmortization expenseEquity in net income of SaberIdentifiable intangiblesInvestment in SaberShareholders' equity-SaberNo entry		Answer	Answer
(O)	AnswerAmortization expenseEquity in net income of SaberIdentifiable intangiblesInvestment in SaberShareholders' equity-SaberNo entry		Answer	Answer
	AnswerAmortization expenseEquity in net income of SaberIdentifiable intangiblesInvestment in SaberShareholders' equity-SaberNo entry		Answer	Answer

e. Assume it is now December 31, 2024. Total goodwill impairment as of January 1, 2024 is $100 million, and there is no impairment for 2024. Saber still owns the identifiable intangibles. Prepare consolidation eliminating entries (R) and (O) for 2024.

Enter answers in millions.

Ref.	Description		Debit	Credit
(R)	Goodwill		Answer	Answer
	AnswerAmortization expenseEquity in net income of SaberIdentifiable intangiblesInvestment in SaberShareholders' equity-SaberNo entry		Answer	Answer
	AnswerAmortization expenseEquity in net income of SaberIdentifiable intangiblesInvestment in SaberShareholders' equity-SaberNo entry		Answer	Answer
(O)	AnswerAmortization expenseEquity in net income of SaberIdentifiable intangiblesInvestment in SaberShareholders' equity-SaberNo entry		Answer	Answer
	AnswerAmortization expenseEquity in net income of SaberIdentifiable intangiblesInvestment in SaberShareholders' equity-SaberNo entry		Answer	Answer