Topic: Consolidation in subsequent years, noncontrolling interest
LO 2
(All dollar amount are in thousands)
Panerai acquired 65% of Stefanel's voting stock for $31,550 in cash on January 1, 2015, when Stefanel's book value was $5,000. The fair value of the noncontrolling interest at the date of acquisition was $11,450, and all of Stefanel's assets and liabilities were reported at fair value, except for the following items:
|
Date of Acquisition Book Value
|
Date of Acquisition Fair Value
|
Remaining Life at Date of Acquisition
|
|
Plant & equipment, net
|
$20,000
|
$4,000
|
16 years
|
|
Identifiable intangible: leaseholds
|
0
|
$18,000
|
6 years
|
The leaseholds meet GAAP requirements for capitalization. All depreciation and amortization is straight-line. There is no impairment of plant & equipment or identifiable intangibles in 2015, 2016, or 2017. Total impairment of goodwill arising from this acquisition for the years 2015 and 2016 is $2,000. Goodwill impairment for 2017 is $2,500.
You are preparing the consolidated financial statements for 2017 (third year since acquisition). The trial balances of Panerai and Stefanel at December 31, 2017 appear in the consolidation working paper below. Panerai uses the complete equity method to report its investment on its own books.
|
Panerai
Dr (Cr)
|
Stefanel
Dr (Cr)
|
Dr
|
Cr
|
Consol.
Dr (Cr)
|
|
Current Assets
|
$26,000
|
$7,000
|
|
|
|
Plant & equipment, net
|
140,000
|
90,000
|
|
|
|
Identifiable intangible assets
|
--
|
--
|
|
|
|
Investment in Stefandel
|
30,970
|
--
|
|
|
|
Goodwill
|
--
|
--
|
|
|
|
Total liabilities
|
(148,690)
|
(81,700)
|
|
|
|
Capital stock
|
(5,000)
|
(2,000)
|
|
|
|
Retained earnings, beginning
|
(25,260)
|
(6,000)
|
|
|
|
Accumulated other comprehensive loss (income), beginning
|
(850)
|
500
|
|
|
|
Noncontrolling interest
|
--
|
--
|
|
|
|
Sales revenue
|
(150,000)
|
(50,000)
|
|
|
|
AFS investments (gains)/losses (OCI)
|
(275)
|
200
|
|
|
|
Equity in income of Stefanel
|
(2,025)
|
--
|
|
|
|
Equity in OCL of Stefanel
|
130
|
--
|
|
|
|
Cost of goods sold
|
120,000
|
30,000
|
|
|
|
Operating expenses
|
15,000
|
12,000
|
|
|
|
Noncontrolling interest in income
|
|
|
|
|
|
Noncontrolling interest in OCI
|
|
|
|
|
|
Total
|
$0
|
$0
|
|
|
Required:
a. Calculate the total goodwill originally recognized for this acquisition, and its allocation to the controlling interest and the noncontrolling interest.
b. Calculate 2017 quity in net income of Stefanel, reported on Panerai's book, and noncontrolling interest in consolidated net income, reported on the 2017 consolidated income statement.
c. Using the CERON method, prepare the entries needed for the consolidation working paper.
d. Prepare and complete the consolidation working paper needed to consolidate the trial balances of Panerai and Stefanel at December 31, 2017. Be sure to label your adjusting/elimination entries with the appropriate letter (CERON).
e. Present, in good form, the consolidated statement of income and comprehensive income for 2017.
General Instructions:
Items a. through e. above must be prepared in Excel and cells that are the result of calculations must be defined by a formula. Do not simply use Excel as a typewriter. Failure to follow these instructions will result in the assignment not being graded. Please have a total for each column at the bottom of the column.