On January 1, 2016, Panther Co. paid $344 million cash for 90% of the voting stock of Scott Co. Scotts balance sheet at the date of acquisition was (in millions):

Cash $ 5 Accounts Payable $16

Receivables 10 Mortgage Payable 60

Inventory 35 Com. Stock at par 20

PPE, net 350 APIC 130

Total $400 Retained Earnings 174

Total $400

At the time of acquisition, the FV of the noncontrolling (10%) interest was $36 million. Panther estimated that BV and FV were equal for most assets and liabilities but that Equipment (part of PPE) with a 9 year remaining life was undervalued by $18 million and that Scott had unrecorded Brand names (indefinite life) worth $16 million. Panther uses the equity method to account for its investment in Scott and Scott does not use pushdown accounting. Both are US firms and they do not do business with each other.

Scotts reported net income in 2016 and 2017 were $62 million and $86 million, respectively. Scott paid dividends of $20 million in 2016, and $24 million in 2017. Goodwill has not been impaired but brands were impaired by $6 million in 2017. Goodwill was impaired in 2018 by $10 million.

1. At the acquisition date, calculate (a) total goodwill, and determine (b) Panthers share and the (c) noncontrolling interests (NCI) share. (Note: I rounded the parents percentage to a tenth of a % for later use.)

2. If Panther wanted to set up a consolidated balance sheet on January 1, 2016, (a) show the consolidating entries that would be needed. (b) Show the balance for PPE that would be shown on the Jan. 1, 2016 consolidated balance sheet (assume Panthers net PPE was $950 mil at the time). (c) Show the balance for NCI that would be shown in the Jan. 1, 2016 consolidated balance sheet.

3. For 2016 and 2017, calculate Panthers Equity in Scotts NI and NCIs Equity in Scotts NI.

4. As of the end of 2017, what would be the balance in Panthers Investment in Scott account? A good way to find this balance is to work through all the journal entries that affect this account from Jan. 1, 2016 through the end of 2017, and post them to the Investment t-account.

5. Assume we are now at the end of 2018. The pre-closing trial balances for Panther and Scott are shown in the consolidating worksheet. For 2018, (a) calculate Panthers and NCIs Equity in Scotts NI and show Panthers equity method entry or entries for 2018. Then (b) show all the consolidating entries needed to do consolidated financial statements for 2018.

6. Post your 2018 consolidating entries to the worksheet. Then show the Consolidated Income Statement, Consolidated Statement of Retained Earnings (this is just beginning R/E + NI Div = ending R/E), and Consolidated Balance Sheet for 2018.