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Question: December 31, 20X5 Posey Company acquired 90% of Stargell Corporations outstanding common stock f...

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December 31, 20X5

Posey Company acquired 90% of Stargell Corporations outstanding common stock for $1,116,900. On that date: The fair value of the noncontrolling interest was $124,100; Stargell reported common stock outstanding of $487,000, premium on common stock of $267,000, and retained earnings of $407,000; the book values and fair values of Stargells assets and liabilities were equal except for land, which was worth $30,000 more than its book value.

On April 1, 20X6

Posey issued at par $200,000 of 10% bonds directly to Stargell; interest on the bonds is payable March 31 and September 30.

On January 2, 20X7

Posey purchased all of Stargells outstanding 10-year, 12% bonds from an unrelated institutional investor at 98. The bonds originally had been issued on January 2, 20X1, for 101. Interest on the bonds is payable December 31 and June 30.

Since the date it was acquired by Posey

Stargell has sold inventory to Posey on a regular basis. The amount of such intercompany sales totaled $67,000 in 20X6 and $83,000 in 20X7, including a 30% gross profit. All inventory transferred in 20X6 had been resold by December 31, 20X6, except inventory for which Posey had paid $18,000 and did not resell until January 20X7. All inventory transferred in 20X7 had been resold at December 31, 20X7, except merchandise for which Posey had paid $16,667.

As of December 31, 20X7

Stargell had declared but not yet paid its fourth-quarter dividend of $12,750. Both Posey and Stargell use straight-line depreciation and amortization, including the amortization of bond discount and premium. On December 31, 20X7, Poseys management reviewed the amount attributed to goodwill as a result of its purchase of Stargell common stock and concluded that an impairment loss in the amount of $25,000 had occurred during 20X7 and should be shared proportionately between the controlling and noncontrolling interests. Posey uses the fully adjusted equity method to account for its investment in Stargell.

a. Compute the amount of the goodwill as of January 1, 20X7.

b. Compute the balance of Poseys Investment in Stargell Stock account as of January 1, 20X7. (Do not round your intermediate calculations. Round your final answer to nearest whole dollar.)

c. Compute the income that should be assigned to the noncontrolling interest in the 20X7 consolidated income statement. (Do not round your intermediate calculations. Round your final answer to nearest whole dollar.)

d. Compute the total noncontrolling interest as of December 31, 20X6. (Do not round your intermediate calculations. Round your final answer to nearest whole dollar.)

e. Compute the gain or loss on the constructive retirement of Stargells bonds that should appear in the 20X7 consolidated income statement. (Do not round your intermediate calculations. Round your final answer to nearest whole dollar.)

f. Present all consolidation entries that would appear in a three-part consolidation worksheet as of December 31, 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations. Round your final answers to nearest whole dollar.)

Posey Company Debit Stargell Corporation Debit Credit Item Cash Current Receivables Inventory Investment in Stargell Stock Investment in Stargell Bonds Investment in Posey Bonds Land Buildings and Equipment Cost of Goods Sold Depreciation & Amortization Other Expenses Dividends Declared Accumulated Depreciation Current Payables Bonds Payable Premium on Bonds Payable Common Stock Premium on Common Stock Retained Earnings, January 1 Sales Other Income Income from Stargell Corp Total Credit 49,500 121,500 317,000 1,243,800 985,000 $39,000 90,100 364,900 1,241,000 2,940,000 1,829,000 184,000 632,000 61,000 200,000 518,000 1,915,000 426,000 65,000 206,000 51,000 597,000 213,000 1,000,000 3,000 487,000 267,000 457,000 801,000 50,000 $1,050,000 699,190 200,000 910,000 610,000 2,848,950 3,010,000 143,000 132,660 $ 9,603,800 $ 9,603,800 3,875,000 3,875,000