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)