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. Asias 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 Europes end-year adjustment to record its equity in Asias income for 2020.

1-Prepare consolidation adjustment entries (20 points).

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

Asia Balance Sheet at December 31, 2020 (in Income Statement 2020 (in thousands) thousands) Europe Asia Europe 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 20,2251 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 7,0001 Total equities 556,825 192,500