Europe Inc. acquired 75% of Asia Corp.'s common stock for $20,100,000 paid in cash on January 2, 2017. The estimated fair value of the noncontrolling interest was $5,900,000. Asia's book value at the date of acquisition was $10,000,000, and its identifiable net assets were fairly stated except for previously unreported completed technology, valued at $4,000,000, with a remaining life of 5 years, straight-line. It is now December 31, 2020, and you are preparing consolidated financial statements for Europe and Asia. Following is information on intercompany transactions:

1.On January 2, 2018, Europe sold equipment to Asia for $6 million and recorded a gain of $2 million. The equipment had a remaining life of 10 years at that time.

2.Asia supplies Europe with component parts for its products, at a markup of 20% on cost. During 2020, Asia made sales totaling $20 million to Europe. Europe had parts purchased for $1.8 million and $2.4 million in its 2020 beginning and ending inventory balances, respectively (Hint: $1.8 million is the unsold inventory from last year and $2.4 million is the unsold inventory of this year).

3.Europe sells materials to Asia for use in its manufacturing processes, with a 20% gross profit ratio. During 2020, Europe made sales totaling $15 million to Asia. Asia had materials purchased for $3 million and $2.8 million in its 2020 beginning and ending inventory balances, respectively. (Hint: $3 million is the unsold inventory from last year and $2.8 million is the unsold inventory of this year).

Goodwill arising from this acquisition was impaired by a total of $3 million during the years 2017-2019, and no further goodwill impairment occurred in 2020. The separate December 31, 2020 trial balances of Europe and Asia appear below before Europe's end-year adjustment to record its equity in Asia's income for 2020.

Balance Sheet at December 31, 2020 (in thousands)

Europe Asia

Cash 1,000 2,500

A/R, net 5,600 10,000

Inventories 70,000 30,000

Plant and Equipment, net460,000 150,000

Investment in Asia 20,225

Total Assets 556,825 192,500

Current Liabilities 4,000 2,800

Long-term debt 489,825 163,700

Capital Stocks 5,000 2,000

Retained earn 1/1 90,000 20,000

Dividend (40,000) (3,000)

Net Income 8,000 7,000

Total equities 556,825 192,500

Income Statement 2020 (in thousands)

Europe Asia

Sales 150,000 50,000

Cost of Sales (100,000) (35,000)

Other Expenses (42,000) (8,000)

Income from Asia

Net Income 8,000 7,000

Required:

1.Determine the Goodwill assigned to Non-controlling interest at the acquisition date (2 points).

2.Determine the balance for the account "Investment in Asia" at December 31, 2020 after Europe's end-year adjustment to record its equity in Asia's income for 2020 (Hint: Dividend adjustment is already included in the balance of investment). Show your calculations (3 points).

3.Determine the balance of the account "Equity in Asia's Income" for the year 2020. Show your calculations (2 points).

4.Calculate the balance of NCI at December 31, 2020. Provide detail calculations of the three components of this balance (3 points).

5.Prepare consolidation adjustment entries (20 points).

6.Complete the consolidated worksheet for Europe Inc. and its subsidiary Asia as of December 31, 2020. Use the format provided on the next page (10 points).