Calculation of Investment Balance, Comprehensive Eliminating Entries, Variety of Intercompany Transactions

Poplar Outdoor Corporation owns 60 percent of the voting stock of Sugg Australia. Date-of-acquisition information is as follows:

Acquisition cost: $19.75 million

Fair value of the noncontrolling interest: $10.25 million

Sugg's book value: $5 million

Value of unreported acquired indefinite lived trademarks: $7.5 million.

As of the beginning of the current year, trademarks are impaired by $1 million, and goodwill impairment is $2.5 million. There is no current year impairment for the trademarks, but current year goodwill impairment is $500,000. Sugg reports net income of $750,000 for the current year, and declares no dividends. Its total equity at the beginning of the year is $9.5 million.

Following is information on intercompany transactions between Poplar and Sugg:

Sugg sold land to Poplar in the current year at a loss of $250,000. Poplar still owns the land.

Intercompany profit in Poplar's beginning inventory, purchased from Sugg, is $100,000.

Intercompany profit in Poplar's ending inventory, purchased from Sugg, is $145,000.

Total sales from Sugg to Poplar, at the price charged to Poplar, were $3 million.

Poplar sold administrative facilities with a book value of $4 million to Sugg two years ago, at the beginning of the year, for $3.5 million. The facilities had a remaining life of 10 years, straight-line. Sugg still uses the facilities.

Required

a. Prepare a schedule to compute equity in net income and noncontrolling interest in net income for the current year, assuming Poplar uses the complete equity method.

HINT: Goodwill share to controlling interest is 70% (NCI's share is 30%).

b. Compute the investment balance on Poplar's books at the end of the current year. (Show Work)

Instructions:

HINT: Goodwill share to controlling interest is 70% (NCI's share is 30%).

c. Prepare the current year eliminating entries (C), (I), (E), (R), (O), and (N), to consolidate the end-of-year trial balances of Poplar and Sugg.