Reference no: EM132471702
Pablo S.A is a manufacturer of children's shoes, located in Spain. It owns 51% of the voting stock of Stabfoot. A specialty shoe manufacturer located in Belgium Pablo acquired its interest in Stabfoot several years ago, and has consolidated Stabfoot in its financial statements since the date of acquisition. Per IFRS, Stabfoo's identifiable assets and liabilities were revalued to fair value at the date of acquisition. This process led to recognition of customer and distributor relationships valued at 40 million euros, and goodwill at 120 million euros. Pablo uses the IFRS alternative and does not attribute goodwill to the noncontrolling interest. As of the beginning of the current year, the goodwill and identifiable intangibles are not impaired. Goodwill is impaired by 10 million in the current year. Pablo and stabfoot engage in intercompany transfers of merchandise.
Below is information on these transactions;
Point 1: Pablo sells merchandise to Stabfoot at a markup of 20% on price
Point 2: Stabfoot sells merchandise to Pablo at a markup of 20% on cost
Point 3: Balance in Pablo's beginning inventory purchased from Stabfoot 24 million euros
Point 4: Balance in Pablo's ending inventory purchased from Stabfoot 26.4 million euros
Point 5: Total sales from Stabfoot to Pablo at the price changed to Pablo 125 million euros
Point 6: Balance in Stabfoot's beginning inventory purchased from Pablo 22.5 million euros
Point 7: Balance in Stabfoot's ending inventory purchased from Pablo 25 million euros
Point 8: Total sales from Pablo to Stabfoot at the price charged to Stabfoot 130 million euros
Pablo uses the complete equity method to account for its investment in stabfoot on its own books. The separate trial balances for the two companies for the current year are below:
Euros In thousands) Pablo Dr (Cr) Stabfoot Dr(Cr) .
Current assets 80,000 60,000
Plant assets net 210,440 137,000
Intangibles 10,000 -
investment in Stabfoot 178,236 -
Liabilities (286,300) (89,000)
Capital stock (2,000) (1,000)
Retained earnings beginning (187,000) (99,000)
Sales revenue (800,000) (500,000)
Equity in net loss 6,624 -
Cost of goods sold 650,000 300,000
Operating expenses 140,000 192,000
Total 0 0
Required:
Question A) Calculate Pablo's equity in net loss and the noncontrolling interest in net income for the current year.
Question B) Prepare working paper to consolidate the trial balances of Pablo and Stabfoot. Label you eliminating entries (C) (I) (E) (R) (O) and (N)