Reference no: EM133179156
Question - On January 1, 2015, Pomegranate Company acquired 80% of the voting stock of Starfruit Company for $89,200,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $13,000,000. Starfruit's book value was $12,800,000 at the date of acquisition. Starfruit's assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $25,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $40,000,000 and 5-year life, straight-line, which were capitalized following GAAP.
Additional information - Pomegranate uses the complete equity method to account for its investment in Starfruit on its own books. Goodwill recognized in this acquisition was impaired by a total of $2,000,000 in 2015 and 2016, and by $500,000 in 2017. It is now December 31, 2017, the accounting year-end. Here is Starfruit Company's trial balance at December 31, 2017:
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Dr (Cr)
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Current assets
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$27,000,000
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Plant & equipment, net
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188,000,000
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Intangibles
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2,500,000
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Liabilities
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(179,000,000)
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Capital stock
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(1,100,000)
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Retained earnings, January 1
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(29,800,000)
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Acumulated other comprehensive income, January 1
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(500,000)
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Dividends
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400,000
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Sales revenue
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(24,000,000)
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Cost of goods sold
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10,000,000
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Operating expenses
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6,600,000
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Other comprehensive income
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(100,000)
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$ 0
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Required - On the 2017 consolidated income statement, compute the noncontrolling interest in net income of Starfruit?
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