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 amarkup 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 a20% 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,beforeEurope's end-year adjustment to record its equity in Asia's income for 2020.

Balance Sheet at December 31, 2020 (in thousands) view photo

Income Statement 2020 (in thousands) view photo

Balance Sheet at December 31, 2020 Income Statement 2020 (in thousands) (in thousands) Europe Asia Europe Asia Cash 1,000 2,500 Sales 150,000 50,000 A/R, net 5,600 10,000 Cost of Sales (100,000) (35,000) Inventories 70,000 30,000 Other Expenses (42,000) (8,000) Plant and Equipment, net 460,000 150,000 Income from Asia Investment in Asia 20,225 Net Income 8,000 7,000 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 earnings, January 1 90,000 20,000 Dividend (40,000) (3,000) Net Income 8,000 7,000 Total equities 556,825 192,500Accounts Europe Asia Consolidation Entries Noncontrolling Consolidated Debi Credit Interest Total Sales (150,000 (50,000) Cost of Sales 100,000 35,000 Operating Expenses (Including Depreciation 42,000 8,000 Equity in Asia's Income Separate company net income (7,000) Consolidated Net Income NCI in Asia Income Net Income to Controlling Interest Retained Earnings 1/1/20 Europe Inc. (90,000] Asia Corp (20,000) Net Income (above) 7,000) Dividend paid 40,000 3,000 Retained Earnings 12/31/2020 (24,000) Cast 1,000 2,500 A/R 5,600 10,000 Inventory 70,000 30,000 Plant and Equipment, net 160,000 150,000 Investment in Asia Total Assets 192,500 Current Liabilities (4.0001 12.800) Long-term debt (489,825) (163,700) Capital Stocks (5,000) (2,000) NCI In Asia 1/1/2020 NCI In Asia 12/31/2020 Retained Earnings 12/31/2020 (24,000) Total Liabilities and Equities (192,500)