Private Manufacturing Company acquired 90 percent of Secret Corporation's outstanding common stock on December 31, 20X5, for $1,152,000. At that date, the fair value of the noncontrolling Interest was $128,000, and Secret reported common stock outstanding of $500,000, premium on common stock of $280,000, and retained earnings of $420,000. The book values and fair values of Secret's assets and liabilities were equal except for land, which was worth $30,000 more than its book value. On April 1, 20X6, Private Issued at par $200,000 of 10 percent bonds directly to Secret; Interest on the bonds is payable March 31 and September 30. On January 1, 20X7, Private purchased all of Secret's outstanding 10-year 12 percent bonds from an unrelated Institutional Investor at 98. The bonds originally had been issued on January 1, 20X1, for 101. Interest on the bonds is payable December 31 and June 30. Since the date it was acquired by Private Manufacturing, Secret has sold Inventory to Private on a regular basis. The amount of such Intercompany sales totaled $64,000 in 20X6 and $78,000 in 20X7, Including a 30 percent gross profit. All Inventory transferred in 20X6 had been resold by December 31, 20X6, except Inventory for which Private had paid $15,000 and did not resell until January 20X7. All Inventory transferred in 20X7 had been resold at December 31, 20X7, except merchandise for which Private had paid $18,000. At December 31, 20X7, trial balances for Private and Secret appeared as follows: Iten Cash Current Receivables Inventory Investment in Secret Stock Private Manufacturing Debit Secret Corporation Credit Debit Credit $ 39,500 112,500 $ 29,000 85,100 301,000 Investment in Secret Bonds Investment in Private Bonds Land Buildings & Equipment Cost of Goods Sold Depreciation & Amortization Other Expenses Dividends Declared Accumulated Depreciation Current Payables Bonds Payable Premium on Bonds Payable Common Stock Premium on Common Stock Retained Earnings, January 1 Sales Other Income 1,240,631 984,121 1,231,000 2,750,000 2,009,000 195,000 643,000 50,000 Income from Secret Corp. Total 348,900 200,000 513,000 1,835,000 430,000 $1,210,000 98,000 200,000 1,000,000 700,000 3,027,695 3,101,000 85,000 205,874 40,000 $ 619,000 79,000 1,000,000 4,268 500,000 280,000 468,606 790,000 134,121 31,000 $9,555,752 84,936 $9,555,752 $3,771,874 $3,771,874 As of December 31, 20X7. Secret had declared but not yet paid its fourth-quarter dividend of $10,000. Both Private and Secret use the effective interest method for the amortization of bond discount and premium. On December 31, 20X7, Private's management reviewed the amount attributed to goodwill as a result of its purchase of Secret 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. Private uses the fully adjusted equity method to account for its investment in Secret. Required: a. Compute the amount of the goodwill as of January 1, 20X7. Answer is complete and correct. Goodwill at acquisition $ 50,000 b. Compute the balance of Private's Investment In Secret Stock account as of January 1, 20X7. (Do not round your intermediate calculations. Round your final answer to nearest whole dollar.) Answer is complete and correct. Balance in Investment $1,191,895 c. Compute the gain or loss on the constructive retirement of Secret's bonds that should appear in the 20X7 consolidated Income statement. (Do not round your Intermediate calculations. Round your final answer to nearest whole dollar.) Gain Answer is complete but not entirely correct. on constructive retirement $14,000 d. 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 answer to nearest whole dollar.) Answer is complete but not entirely correct. Income to noncontrolling interest $9,210 e. Compute the total noncontrolling interest as of December 31, 20X6. (Do not round your intermediate calculations. Round your final answer to nearest whole dollar.) Answer is complete but not entirely correct. Total noncontrolling interest $ 132,550 f. Present all consolidation entries that would appear in a three-part consolidation worksheet as of December 31, 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your Intermediate calculations. Round your final answers to nearest whole dollar.) Answer is complete but not entirely correct. No A Event 1 Common stock Premium on common stock Accounts Retained earnings Income from Secret Corporation NCI in NI of Secret Corporation Dividends declared Investment in Secret stock NCI in NA of Secret Corporation B 2 Goodwill impairment loss Income from Secret Corporation NCI in NI of Secret Corporation C 3 Land Goodwill Investment in Secret stock NCI in NA of Secret Corporation D 4 Investment in Secret stock NCI in NA of Secret Corporation Cost of goods sold E 5 Sales Cost of goods sold F 8 G 7 Inventory Bonds payable Investment in Private bonds Other income Other expenses H 8 Current payables Current receivables 1 9 Bonds payable Premium on bonds payable Other income Investment in Secret bonds Gain on retirement of bonds Other expenses J 10 Current payables Current receivables 0000 Debit Credit 500,000 280,000 470,000 105,390 >> 11,710 x 40,000 1,194,390 132,710 25,000 22,500 2,500 30,000 25,000 49,500 5,500 4,050 450 4,500 78,000 72,600 5,400 200,000 200,000 20,000 20,000 5,000 5,000 1,000,000 4.268 125,000 985,000 24,000 119,000 9,000 9,000 g. Prepare and complete a three-part worksheet for the preparation of consolidated financial statements for 20X7. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly. combine all credit entries into one amount and enter this amount in the credit column of the worksheet.) Answer is not complete. PRIVATE MANUFACTURING COMPANY AND SUBSIDIARY Consolidated Financial Statement Worksheet December 31, 20X7 Consolidation Entries Private Co. Secret Corp. DR CR Consolidated Income Statement Sales 3,101,000 790,000 Other Income Less: COGS Less: Depr. & Amort. Expense Less: Other Expenses Goodwill Impairment Loss 134,121 31,000 78,000 145,000 x 3,813,000 20,121 (2,009,000) (430,000) 4,500 (2,434,500) (195,000) (85,000) (280,000) (643,000) (205,874) 139.000 x (709,874) 25,000 (25,000) Gain on Bond Retirement 24.000 24,000 Income from Secret Corp. 84,938 105,390 x 22,500 2,048 Consolidated Net Income 473,057 100,126 353,390 190,000 409,793 NCI in Net Income 11,710 2,500 (8,210) Controlling Interest in NI 473,057 100,126 385,100 192,500 400,583 Statement of Retained Earnings Beginning Balance 3,028,950 x 470,000 470,000 x 3,028,950 Net Income 473.057 100,126 385,100 192,500 400,583 Less: Dividends Declared (50,000) (40,000) 40,000- (50,000) Ending Balance 3,452.007 530,128 835,100 232,500 3,379,533 Balance Sheet Assets Cash Current Receivables 39,500 29,000 68,500 112,500 85,100 14,000 183,600 Inventory 301,000 348,900 5,400 644,500 Land 1,231,000 513,000 30,000 x 1,714,000 Buildings & Equipment 2,750,000 1,835,000 4,585,000 Less: Accumulated Depreciation (1.210,000) (619,000) (1,829,000) Investment in Secret Stock 1,240,631 4,050 1,243,890 791 Investment in Secret Bonds 984.121 Investment in Private Bonds 200,000 985.000 x 200,000 (879) 0 Goodwill Total Assets 5,448,752 2,392,000 25,000 29,050 2,478,290 25,000 5,391,512 Liabilities & Equity Current Payables 98,000 79,000 Bonds Payable 200,000 1,000,000 14,000 1,200,000 183,000 0 Premium on Bonds Payable Common Stock 1,000,000 4,268 500,000 4,288 0 500,000 1,000,000 Premium on Common Stock Retained Earnings 3,452,007 700,000 280,000 530,126 280,000 700,000 835,100 232,500 3,379,533 NCI in NA of Secret Corp. Total Liabilities & Equity 5,450.007 2,393,394 450 2,833,818 138,210 370,710 137,780 5,380,293