On January 2, 2017, Palace Shoes acquired 60% of the stock of Sage Footwear. Palace uses the complete equity method to account for its investment in Sage.
Sage's assets and liabilities were reported at amounts approximating fair value, except for previously unreported indefinite life identifiable intangible assets valued at $10,000. These intangible assets were impaired by $2,000 during the years 2017-2019 and are impaired by $500 during 2020.
The goodwill recognized for this acquisition was $56,500, split between Palace and the noncontrolling interest in a 70:30 ratio. There has been no goodwill impairment during 2017-2019, but testing reveals goodwill impairment of $1,500 in 2020.
Sage sells merchandise to Palace (upstream sales) on a regular basis at a 25% markup on cost. Information on sales activities is as follows:
Required
a. Calculate 2020 equity in net income and noncontrolling interest in net income.
b. Fill in the working paper as necessary to consolidate the December 31, 2020 trial balances of Palace and Sage. Label the eliminating entries (C),( I), (E), (R), (O), (N).

Question

On January 2, 2017, Palace Shoes acquired 60% of the stock of Sage Footwear. Palace uses the complete equity method to account for its investment in Sage.
Sage's assets and liabilities were reported at amounts approximating fair value, except for previously unreported indefinite life identifiable intangible assets valued at $10,000. These intangible assets were impaired by $2,000 during the years 2017-2019 and are impaired by $500 during 2020.
The goodwill recognized for this acquisition was $56,500, split between Palace and the noncontrolling interest in a 70:30 ratio. There has been no goodwill impairment during 2017-2019, but testing reveals goodwill impairment of $1,500 in 2020.
Sage sells merchandise to Palace (upstream sales) on a regular basis at a 25% markup on cost. Information on sales activities is as follows:
  Required
a. Calculate 2020 equity in net income and noncontrolling interest in net income.
b. Fill in the working paper as necessary to consolidate the December 31, 2020 trial balances of Palace and Sage. Label the eliminating entries (C),( I), (E), (R), (O), (N).

Quizplus · Accepted Answer

The Answer of On January 2, 2017, Palace Shoes acquired 60% of the stock of Sage Footwear. Palace uses the complete equity method to account for its investment in Sage.
Sage's assets and liabilities were reported at amounts approximating fair value, except for previously unreported indefinite life identifiable intangible assets valued at $10,000. These intangible assets were impaired by $2,000 during the years 2017-2019 and are impaired by $500 during 2020.
The goodwill recognized for this acquisition was $56,500, split between Palace and the noncontrolling interest in a 70:30 ratio. There has been no goodwill impairment during 2017-2019, but testing reveals goodwill impairment of $1,500 in 2020.
Sage sells merchandise to Palace (upstream sales) on a regular basis at a 25% markup on cost. Information on sales activities is as follows:
  Required
a. Calculate 2020 equity in net income and noncontrolling interest in net income.
b. Fill in the working paper as necessary to consolidate the December 31, 2020 trial balances of Palace and Sage. Label the eliminating entries (C),( I), (E), (R), (O), (N).

On January 2, 2017, Palace Shoes Acquired 60% of the Stock