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 $4 million in its 2020 beginning and ending inventory balances, respectively (Hint: $1.8 million is the unsold inventory from last year and $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.

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 Europes end-year adjustment to record its equity in Asias 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 Asias 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 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).

Balance Sheet at December 31, 2020 (in thousands) Income Statement 2020 (in thousands) Asia Asia Sales Cash A/R, net Inventories Plant and Equipment, net Investment in Asia Europe 1,000 5,600 70,000 460,000 20,225 2,500 10,000 30,000 150,000 Europe 150,000 (100,000) (42,000) 50,000 (35,000) (8,000) Cost of Sales Other Expenses Income from Asia Net Income 8,000 7,000 Total Assets 556,825 192,500 2,800 Current Liabilities Long-term debt Capital Stocks Retained earnings, January 1 Dividend 4,000 489,825 5,000 90,000 (40,000) 8,000 163,700 2,000 20,000 (3,000) 7,000 192,500 Net Income Total equities 556,825 Balance Sheet at December 31, 2020 (in thousands) Income Statement 2020 (in thousands) Asia Asia Sales Cash A/R, net Inventories Plant and Equipment, net Investment in Asia Europe 1,000 5,600 70,000 460,000 20,225 2,500 10,000 30,000 150,000 Europe 150,000 (100,000) (42,000) 50,000 (35,000) (8,000) Cost of Sales Other Expenses Income from Asia Net Income 8,000 7,000 Total Assets 556,825 192,500 2,800 Current Liabilities Long-term debt Capital Stocks Retained earnings, January 1 Dividend 4,000 489,825 5,000 90,000 (40,000) 8,000 163,700 2,000 20,000 (3,000) 7,000 192,500 Net Income Total equities 556,825