Calculation of Investment Balance, Comprehensive Eliminating Entries, Variety of Intercompany Transactions
Poplar Outdoor Corporation owns 60 percent of the voting stock of Sugg Australia. Date-of-acquisition information is as follows:
Acquisition cost: $39.5 million
Fair value of the noncontrolling interest: $20.5 million
Sugg's book value: $10 million
Value of unreported acquired indefinite lived trademarks: $15 million.
As of the beginning of the current year, trademarks are impaired by $2 million, and goodwill impairment is $5 million. There is no current year impairment for the trademarks, but current year goodwill impairment is $1 million. Sugg reports net income of $1.5 million for the current year, and declares no dividends. Its total equity at the beginning of the year is $19 million.
Following is information on intercompany transactions between Poplar and Sugg:
Sugg sold land to Poplar in the current year at a loss of $500,000. Poplar still owns the land.
Intercompany profit in Poplar's beginning inventory, purchased from Sugg, is $200,000.
Intercompany profit in Poplar's ending inventory, purchased from Sugg, is $290,000.
Total sales from Sugg to Poplar, at the price charged to Poplar, were $6 million.
Poplar sold administrative facilities with a book value of $8 million to Sugg two years ago, at the beginning of the year, for $7 million. The facilities had a remaining life of 10 years, straight-line. Sugg still uses the facilities.
For all answers below, enter in thousands. For example, $1 million is $1,000.
a. Prepare a schedule to compute equity in net income and non controlling interest in net income for the current year, assuming Poplar uses the complete equity method.