Giant acquired all of Smalls common stock on January 1, 2017, in exchange for cash of $770,000. On that day, Small reported common stock of $170,000 and retained earnings of $400,000. At the acquisition date, $32,500 of the fair-value price was attributed to undervalued land while $95,500 was assigned to undervalued equipment having a 10-year remaining life. The $72,000 unallocated portion of the acquisition-date excess fair value over book value was viewed as goodwill. Over the next few years, Giant applied the equity method to the recording of this investment.

The following are individual financial statements for the year ending December 31, 2021. On that date, Small owes Giant $11,900. Small declared and paid dividends in the same period. Credits are indicated by parentheses.

	Giant				Small
Revenues	$	(1,183,550	)		$	(462,500	)
Cost of goods sold		583,000				98,500
Depreciation expense		187,000				148,000
Equity in income of Small		(206,450	)			0
Net income	$	(620,000	)		$	(216,000	)
Retained earnings, 1/1/21	$	(1,720,000	)		$	(642,000	)
Net income (above)		(620,000	)			(216,000	)
Dividends declared		310,000				120,000
Retained earnings, 12/31/21	$	(2,030,000	)		$	(738,000	)
Current assets	$	439,750			$	334,000
Investment in Small		1,060,250				0
Land		526,000				260,000
Buildings (net)		390,000				432,000
Equipment (net)		739,000				294,000
Goodwill		0				0
Total assets	$	3,155,000			$	1,320,000
Liabilities	$	(875,000	)		$	(412,000	)
Common stock		(250,000	)			(170,000	)
Retained earnings(above)		(2,030,000	)			(738,000	)
Total liabilities and equities	$	(3,155,000	)		$	(1,320,000	)

1. How was the $206,450 Equity in Income of Small balance computed?
2. Determine the totals to be reported by this business combination for the year ending December 31, 2021.
3. Prepare a consolidation worksheet for Giant and Small for the year ending December 31, 2021.
4. If Giant determined that the entire amount of goodwill from its investment in Small was impaired in 2021, what journal entry would Giant make to record such impairment?

Equity in Income of Small 02 S 0 Totals Revenues Cost of goods sold Depreciation expense Income of Small Net income Retained earnings, 1/1/21 Dividends declared Retained earnings, 12/31/21 Current assets Investment in Small Land Building (net) Equipment (net) Goodwill Total assets Liabilities Common stock Retained earnings, 12/31/21 Total liabilities and equity GIANT COMPANY AND SMALL COMPANY Consolidation Worksheet For Year Ending December 31, 2021 Consolidation Entries Accounts Giant Small Debit Credit Consolidated Totals Revenues S (462.500) 98,500 $ (1.183,550) 583.000 187.000 (206.450) S (620.000) Cost of goods sold Depreciation expense Equity income of Small Net income 148,000 0 S (216.000) S Retained earning. 1/1/21 Net income (above) Dividends declared Retained earnings, 12/31/21 $ (1,720.000) (620.000) 310.000 $ (2,030,000) (642.000) (216.000) 120,000 (738.000) S s $ 334,000 0 Current assets Investment in Small Land Buildings (net) Equipment (net) Goodwill 439,750 1,060,250 526,000 390,000 739,000 260.000 432,000 294,000 Total assets S 3,155,000 S 1,320,000 Liabilities Common stock Retained earnings (above) Total liabilities and equity s (875,000) (250.000) (2,030,000) $ (3,155,000) S (412.000) (170.000) (738.000) S (1,320,000) 0 0 1 Record the loss on impairment of goodwill. Note: Enter debits before credits. Transaction General Journal Debit Credit 1