Overview You are a financial accountant for Posey Company tasked with preparing consolidation documentation at year end. You have the following information: December 31, 20X5 Posey Company acquired 90 % of Stargell Corporation's 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 Stargell's 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 Stargell's 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, Posey's management reviewed the amount attributed to goodwill as 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 On December 31, 20X7, trial balances for Posey and Stargell appeared as follows: Posey Company Stargell Corporation Debit Credit Debit Credit Item Cash 49,500 39,000 Current Receivables 121,500 90,100 Inventory 317,000 364,900 Investment in Stargell Stock Investment in Stargell Bonds 1,243,800 985,000 Investment in Posey Bonds 200,000 1,241,000 Land 518,000 Buildings and Equipment 2,940,000 1,915,000 Cost of Goods Sold 1,829,000 426,000 Depreciation & Amortization 184,000 65,000 Other Expenses 632,000 206,000 Dividends Declared 61,000 51,000 Accumulated Depreciation 1,050,000 597,000 Current Payables 213,000 699,190 Bonds Payable 200,000 1,000,000 Premium on Bonds Payable 3,000 Common Stock 910,000 487,000 Premium on Common Stock 610,000 267,000 Retained Earnings, January 1 2,848,950 457,000 Sales 801,000 3,010,000 Other Income 143,000 132,660 50,000 Income from Stargell Corp. Total S 9,603,800 9,603,800 3,875,000 3,875,000 A C Required: a. Compute the amount of the goodwill as of January 1, 20X7 Goodwill at acquisition Goodwill as of January 1, 20X7: Goodwill at acquisition 5 b. Compute the balance of Posey's Investment in Stargell Stock account as of January 1, 20X7. (Do not round your intermediate calculations. Round your final answer to nearest whole dollar.) Balance in investment Stargell stockholders' equity, January 1, 20X7 1 Balance in Investment in Stargell Stock account January 1, 20X7 e. Compute the gain or loss on the constructive retirement of Stargell's bonds that should appear 5Gain Gain on constructive retirement of Stargell's bonds: 5 Gain Gain on constructive retirement of Stargell's bonds: 2 Gain on constructive retirement of Stargell's bonds 4 6 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 9 answer to nearest whole dollar.) 1 Income to noncontrolling interest 2 3Stargell's 20X7 net income 4 1 Income to noncontrolling interest 2 3 Net income calculations 1 61 Income to noncontrolling interest 62 63 Net income calculations 64 65 66 67 68 69 70 71 72 Net income 73 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.) 74 75 76 Total noncontrolling interest 77 78 Total noncontrolling interest, December 31, 20X6: Stargell's stockholders' equity, 79 December 31, 20X6 80 81 82 83 84 85 Total noncontrolling interest, 86 December 31, 20X6 87 88