Question
Poplar Outdoor Corporation owns 60 percent of the voting stock of Sugg Australia. Date-of-acquisition information is as follows: Acquisition cost: $59.25 million Fair value of
Poplar Outdoor Corporation owns 60 percent of the voting stock of Sugg Australia. Date-of-acquisition information is as follows:
Acquisition cost: $59.25 million
Fair value of the noncontrolling interest: $30.75 million
Sugg's book value: $15 million
Value of unreported acquired indefinite-lived trademarks: $22.5 million.
As of the beginning of the current year, trademarks are impaired by $3 million, and goodwill impairment is $7.5 million. There is no current-year impairment for the trademarks, but the current-year goodwill impairment is $1.5 million. Sugg reports a net income of $2.25 million for the current year and declares no dividends. Its total equity at the beginning of the year is $28.5 million.
Following is information on intercompany transactions between Poplar and Sugg:
Sugg sold land to Poplar in the current year at a loss of $750,000. Poplar still owns the land.
Intercompany profit in Poplar's beginning inventory, purchased from Sugg, is $300,000.
Intercompany profit in Poplar's ending inventory, purchased from Sugg, is $435,000.
Total sales from Sugg to Poplar, at the price charged to Poplar, were $9 million.
Poplar sold administrative facilities with a book value of $12 million to Sugg two years ago, at the beginning of the year, for $10.5 million. The facilities had a remaining life of 10 years, straight-line. Sugg still uses the facilities.
Required a. Prepare a schedule to compute equity in net income and noncontrolling interest in net income for the current year, assuming Poplar uses the complete equity method.
Instructions: Enter answers in thousands. For example, $900,000 is $900 in thousands and $15 million is $15,000 in thousands. Use negative signs with answers that reduce the net income amounts.
HINT: Goodwill share to controlling interest is 70% (NCI's share is 30%).
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