On January 1, 2018, Perfect Footgear acquired 60 percent of the voting stock of Shine Sports for $900,000 in cash. The fair value of the noncontrolling interest was $500,000. Shine's book value was $600,000. Date-of-acquisition revaluation information for Shine's net assets is as follows:
•Plant assets, with a remaining life of 10 years, straight-line, were overvalued by $300,000.
•Identifiable intangible assets, previously unrecorded, with an 8-year life, straight-line, are valued at $480,000.
It is now December 31, 2020, three years later. Goodwill from this acquisition is not impaired. Shine's January 1, 2020 equity accounts are as follows:
Capital stock……………………………………………………………………………….. $ 100,000
Retained earnings, beginning………………………………………………………. 750,000
Accumulated other comprehensive income, beginning………………… 50,000
Total…………………………………………………………………………………………….. $ 900,000
Shine reported income of $100,000 and other comprehensive income of $10,000 for 2020. Perfect sells merchandise to Shine at a 25% markup on cost. In 2020, Perfect sold merchandise priced at $500,000 to Shine. Shine's beginning inventory included $75,000 in merchandise purchased from Perfect, and its ending inventory included $62,500 in merchandise purchased from Perfect. Perfect uses the complete equity method to account for its investment in Shine on its own books.
Required
a. Calculate total goodwill at the date of acquisition, and its allocation to the controlling and noncontrolling interest.
b. Prepare a schedule calculating equity in net income for 2020, appearing on Perfect's books, and the noncontrolling interest in net income for 2020, appearing on the consolidated income statement.
c. Prepare a schedule calculating the December 31, 2020, balance for Investment in Shine, appearing on Perfect's books, and the balance for the noncontrolling interest, appearing on the consolidated balance sheet at December 31, 2020.
d. Prepare the eliminating entries needed to consolidate the trial balances of Perfect and Shine at December 31, 2020.

Question

Quizplus · Accepted Answer

The Answer of On January 1, 2018, Perfect Footgear acquired 60 percent of the voting stock of Shine Sports for $900,000 in cash. The fair value of the noncontrolling interest was $500,000. Shine's book value was $600,000. Date-of-acquisition revaluation information for Shine's net assets is as follows:
•Plant assets, with a remaining life of 10 years, straight-line, were overvalued by $300,000.
•Identifiable intangible assets, previously unrecorded, with an 8-year life, straight-line, are valued at $480,000.
It is now December 31, 2020, three years later. Goodwill from this acquisition is not impaired. Shine's January 1, 2020 equity accounts are as follows:
Capital stock……………………………………………………………………………….. $ 100,000
Retained earnings, beginning………………………………………………………. 750,000
Accumulated other comprehensive income, beginning………………… 50,000
Total…………………………………………………………………………………………….. $ 900,000
Shine reported income of $100,000 and other comprehensive income of $10,000 for 2020. Perfect sells merchandise to Shine at a 25% markup on cost. In 2020, Perfect sold merchandise priced at $500,000 to Shine. Shine's beginning inventory included $75,000 in merchandise purchased from Perfect, and its ending inventory included $62,500 in merchandise purchased from Perfect. Perfect uses the complete equity method to account for its investment in Shine on its own books.
Required
a. Calculate total goodwill at the date of acquisition, and its allocation to the controlling and noncontrolling interest.
b. Prepare a schedule calculating equity in net income for 2020, appearing on Perfect's books, and the noncontrolling interest in net income for 2020, appearing on the consolidated income statement.
c. Prepare a schedule calculating the December 31, 2020, balance for Investment in Shine, appearing on Perfect's books, and the balance for the noncontrolling interest, appearing on the consolidated balance sheet at December 31, 2020.
d. Prepare the eliminating entries needed to consolidate the trial balances of Perfect and Shine at December 31, 2020.

On January 1, 2018, Perfect Footgear Acquired 60 Percent of the Voting