Equity Method Accounting, Subsequent Years
PL Communications acquired all of the stock of SJ Telecom onJanuary 1, 2019. It is now December 31, 2021, three years later. PLCommunications uses the complete equity method to report itsinvestment in SJ Telecom on its own books. Both companies haveDecember 31 year-ends. The following information is available:
• PL Communications paid $400 million to acquire SJ Telecom.
• At the date of acquisition, the book values of all of SJTelecom’s reported assets and liabilities approximated fair value.Previously unreported limited-lived identifiable intangibles with afair value of $20 million were recognized. These intangibles had anestimated life of 5 years, straight-line. There have been noimpairment losses.
• Total goodwill impairment losses for 2019 and 2020 were $1million. There is no goodwill impairment for 2021.
• The change in SJ Telecom’s retained earnings from January 1,2019, to December 31, 2020, was $12 million.
• In 2021, SJ Telecom reported net income of $6,500,000 anddeclared and paid dividends of $1,500,000.
• SJ Telecom does not report any other comprehensive income.
Required
Enter both answers in millions (using decimal places, ifapplicable).
a. Calculate equity in net income for 2021, reported on thebooks of PL Communications.
$_____ million
b. Calculate the December 31, 2021 balance in Investment in SJTelecom, reported on the books of PL Communications.
$_____ million
