Powerplan Industries Bought Springfield Inc Required
A

Powerplan Industries bought Springfield Inc.'s voting stock on January 1, 2019 for $42,000, when Springfield's book value was $8,000. Fair value information on Springfield's assets and liabilities at the date of acquisition is as follows:
•Property and equipment is overvalued by $7,000. P&E has a 10-year remaining life, straight-line.
•Previously unreported identifiable intangibles are valued at $8,000. These intangibles have indefinite lives, but testing reveals impairment of $2,000 in 2019 and $1,000 impairment in 2020.
•Goodwill reported for this acquisition is not impaired in 2019, but is impaired by $3,000 in 2020.
Powerplan uses the complete equity method to account for its investment in Springfield on its own books. It is now December 31, 2020, two years since the acquisition. The consolidation working paper at December 31, 2020, with the separate trial balances of Powerplan and Springfield, follows.
$\begin{array}{|l|c|c|c|c|c|}\hline & \begin{array}{c}\text { Powerplan } \\\text { Dr (Cr) }\end{array} & \begin{array}{c}\text { Springfield } \\\operatorname{Dr}(\mathrm{Cr})\end{array} & \text { Dr } & \mathrm{Cr} & \begin{array}{l}\text { Consol } \\\mathrm{Dr}(\mathrm{Cr})\end{array} \\\hline \text { Current assets } & \$ 15,000 & \$ 10,000 & & & \\\hline \text { Property \& equipment, net } & 90,000 & 63,000 & & & \\\hline \text { Identifiable intangibles } & & - & & & \\\hline \text { Investment in Springfield } & 44,900 & - & & & \\\hline \text { Goodwill } & - & - & & & \\\hline \text { Liabilities } & (76,200) & (57,500) & & & \\\hline \text { Capital stock } & (40,000) & (5,000) & & & \\\hline \text { Retained earnings, Jan. } 1 & (30,000) & (6,100) & & & \\\hline \text { Treasury stock } & 2,000 & 100 & & & \\\hline \text { Dividends } & - & 500 & & & \\\hline \text { Sales revenue } & (84,000) & (50,000) & & & \\\hline \text { Equity in NI of Springfield } & (1,700) & - & & & \\\hline \text { Cost of goods sold } & 55,000 & 30,000 & & & \\\hline \text { Operating expenses } & 25,000 & 15,000 & & & \\\hline \text { Total } & \$0 & \$0& & & \\\hline\end{array}$
Required
a. Prepare a schedule calculating the initial value of goodwill for this acquisition.
b. Calculate Powerplan's equity in net income of Springfield for 2020.
c. Fill in the consolidation working paper as necessary to consolidate the trial balances of the two companies at December 31, 2020.