Prepare supporting amortization of ECOBV schedule

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Reference no: EM132637458

Question - Large Company acquired for 80% of the voting stock of Small Company on January 1, 2013 paying $10,000,000 in cash. Large accounts for its investment using the equity method. Small's stockholders' equity at the date of acquisition was $6,000,000 ($2,000,000 capital stock, $4,000,000 retained earnings). The estimated fair value of the non-controlling interest in Small Company at the date of acquisition is $2,400,000. As of the date of acquisition:

PPE Overvalued by $3,000,000 20-year useful life, straight-line

Identifiable intangibles Undervalued by $5,500,000 10-year useful life, straight-line Long-term debt Undervalued by $100,000 5-year till maturity, straight-line

Goodwill Impairment: $625,000 in total for 2013-2019; $50,000 for 2020

Note: The impairment in goodwill is distributed between controlling and non-controlling interest based on the percentage of goodwill each of them gets (for example, if the non-controlling interest gets 5% of the entire goodwill, they also get 5% of the impairment).

The 2020 pre-closing trial balances for Large and Small are (in thousands):

Large Company Small Company

Dr (Cr) Dr (Cr)

Sales revenue (35,000) (20,000)

Equity in net income of Small (359)

Cost of goods sold 29,000 14,000

Other operating expenses 5,700 5,100

Net Income (659) (900)

Current assets 20,000 6,000

Plant & equipment, net 55,000 29,700

Investment in Small 12,327

Total Assets 87,327 35,700

Current liabilities (15,000) (6,000)

Long-term debt (20,000) (17,000)

Capital stock (30,000) (2,000)

Retained earnings, Jan. 1 ( 21,768) (10,000)

Net Income (659) (900)

Dividends 100 200

Total Liab. and Equity (87,327) (35,700)

Required -

1. Determine the Goodwill assigned to Non-controlling interest at the acquisition date.

2. Prepare supporting amortization of ECOBV schedule for 2020 and verify the equity in income balance for 2020, as reported on Large's separate income statement.

3. Calculate the balance of NCI at December 31, 2020. Provide detail calculations.

4. Create the consolidated worksheet as of December 31, 2020.

Reference no: EM132637458

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