Karen, a U.S. company, acquired 90% of Scalas voting stock for $32,600 in cash on January 1, 2019, when Scalas book value was $5,000. The fair value of the noncontrolling interest at the date of acquisition was $2,400. At the date of acquisition, all of Scalas assets and liabilities were reported at fair value, except for the following items:

	Date of Acquisition Book Value	Date of Acquisition Fair Value	Remaining Life at Date of Acquisition
Plant assets	$ 20,000	$ 8,000	12 years
Identifiable intangible: Leaseholds	0	20,000	5 years

The identifiable intangible meets the GAAP requirements for capitalization. All depreciation and amortization is straight-line. There is no impairment of plant & equipment or identifiable intangibles in 2019, 2020 or 2021.

Total impairment of goodwill arising from this acquisition for the years 2019 and 2020 is $3,000. Goodwill impairment for 2021 is $1,000.

Scala sells inventory to Kaen at a markup of 20% on cost. Here is information on inventory transactions for 2021. Note that the amounts are the balances reported on the books, so you need to calculate markups as appropriate.

	Balance
Inventory on Karen's books, acquired from Scala, as of January 1, 2021	$ 2,880
Inventory on Karen's books, acquired from Scala, as of December 31, 2021	3,600
Total sales from Scala to Karen, at price charged to Karen, for 2021	25,000

You are preparing the consolidated financial statements for 2021 (third year since acquisition). The trial balances of Karen and Scala at December 31, 2021, collected from the books of Karen and Scala, are in the consolidation working paper below. Karen uses the complete equity method to report its investment on its own books.

Required

a. Calculate the total goodwill originally recognized for this acquisition, and its allocation to the controlling interest and the noncontrolling interest.

b. Calculate 2021 equity in net income of Scala, reported on Karen's books, and noncontrolling interest in consolidated net income, reported on the 2021 consolidated income statement.

c. Fill in the working paper to consolidate the December 31, 2021 trial balances of Karen and Scala. Clearly label eliminating entries (C), (I), (E), (R), (O), and (N).

d. Prepare the consolidated income statement and consolidated statement of comprehensive income for 2021, and the consolidated balance sheet for December 31, 2021

	Karen Dr (Cr)	Scala Dr (Cr)	Dr	Cr	Consol. Dr (Cr)
Current assets	$ 26,000	$ 7,000
Plant assets, net	140,000	90,000
ID intangibles	--	--
Investment in Scala	29,430	--
Goodwill	--	--
Total liabilities	(147,843)	(81,700)
Capital stock	(5,000)	(2,000)
Retained earnings, beg	(25,000)	(8,000)
AOCI, beg.	(850)	500
NCI in equity	--	--
Sales revenue	(150,000)	(50,000)
OC(I) L	(275)	200
Equity in NI of Scala	(1,642)	--
Equity in OCL of Scala	180	--
Cost of goods sold	120,000	30,000
Operating expenses	15,000	14,000
NCI in NI	--	--
NCI in OCI	--	--
Total	$ 0	$ 0