Lily Bakeries, located in Belgium, specializes in biscuit and cake products. Lily owns 75 percent of Hearty Foods, a French company acquired on January 1, 2010, for cash and stock totaling ‚¬150 million. Hearty's book value at the date of acquisition was ‚¬70 million. Its assets and liabilities were fairly reported at the date of acquisition, except for these items:

It is now December 31, 2014. Impairment testing on the acquired goodwill reveals that total impairment during the years 2010-2013 was ‚¬2.5 million, and impairment in 2014 is ‚¬0.75 million. Lily uses the complete equity method to account for its investment internally. The December 31,2014, trial balances of Lily and Hearty follow:

Lily follows IFRS and uses the IFRS alternative valuation for goodwill and noncontrolling interests.
Required
a. Calculate the total goodwill arising from this acquisition.
b. Prepare a schedule calculating Lily's equity in net income of Hearty and the noncontrolling interest in Hearty's net income for 2014.
c. Prepare a working paper consolidating the trial balances of Lily and Hearty at December 31,2014.

Transcribed Image Text:

Book value 150,000 30,000 (in thousands) Fair value Plant and equipment, net (10-year life, straight-line) Secret recipes (10-year life, straight-line). . . . . . . . … …· 100,000 40,000 28,000 . … … Dr (Cr) Lily (in thousands) Current assets...^...v. .. Investment in Hearty Current liabilities Bakeries Hearty Foods 35,000 20,000 202,000 226,500 176,750 100,000 (30,000) 10,000 (25,000) (100,000) (54,000) (38,000) (140,000) Long-term debt (350,000) (80,000) (400.000) (60,000) (11.250) 250,000 143,000 80,000 45,000 0 Operating expenses.. Totals