On December 31, 2012, P Inc. purchased 80% of the outstanding ordinary shares of S Company for $310,000. At that date, S had ordinary shares of $200,000 and retained earnings of $60,000. In negotiating the purchase price, it was agreed that the assets on S's statement of financial position were fairly valued except for plant assets, which had a $40,000 excess of fair value over carrying amount. It was also agreed that S had unrecognized intangible assets consisting of trademarks that had an estimated value of $24,000. The plant assets had a remaining useful life of eight years at the acquisition date and the trademarks would be amortized over a 12-year period. Any goodwill arising from this business combination would be tested periodically for impairment. P accounts for its investment using the cost method and uses the fair value enterprise (entity) theory to prepare consolidated statements.

Additional Information:

At December 31, 2016, an impairment test of S's goodwill revealed its recoverable amount is $50,000

An impairment test indicated that the trademarks had a recoverable amount of $13,750.

The impairment loss on these assets (goodwill and trademarks) occurred entirely in 2016.

On December 26, 2016, P declared dividends of $36,000, while S declared dividends of $15,000.

Amortization expense is reported in selling expenses, while impairment losses are reported in other expenses.

Financial statements for P and S for the year ended December 31, 2016, were as follows:

STATEMENTS OF FINANCIAL POSITION

December 31, 2016

P

S

Assets

Plant assetsnet

$

230,000

$

160,000

Investment in Storm

310,000

Other investments

82,000

22,000

Notes receivable

10,000

Inventory

100,000

180,000

Accounts receivable

88,000

160,000

Cash

20,000

30,000

$

830,000

$

562,000

Shareholders' Equity and Liabilities

Ordinary shares

$

500,000

$

200,000

Retained earnings

110,000

150,000

Notes payable

130,000

100,000

Other current liabilities

10,000

50,000

Accounts payable

80,000

62,000

$

830,000

$

562,000

INCOME STATEMENTS

For the year ended December 31, 2016

P

S

Sales

$

870,000

$

515,000

Cost of goods sold

(638,000)

(360,000)

Gross profit

$

232,000

$

155,000

Selling expenses

(22,000)

(35,000)

Other expenses

(148,000)

(72,000)

Interest and dividend income

34,000

2,000

Profit

$

96,000

$

50,000

1. Calculate the acquisition differential, goodwill and non-controlling interest at acquisition date, December 31, 20X2.
2. Prepare the acquisition eliminating entry at acquisition date on the consolidation worksheet.
3. What would be the value of NCI and goodwill at acquisition date if P had used the identifiable net asset theory to prepare consolidated statements.
4. Prepare the schedule of amortization of acquisition differential and impairment.
5. Calculate consolidated net income for the year ended December 31, 20X6.Separate the portion attributable to P and to non-controlling interest.
6. Prepare the consolidated income statement for year 6.Show attribution to each shareholder group.