Peninsula Industries and Seaport Company, a 90 percent owned subsidiary, engage in extensive intercompany transactions involving raw materials, component parts, and completed products. Peninsula acquired its interest in Seaport several years ago, at a cost of \($3,000,000.\) At that time, Seaport’s book value was \($2,000,000\) and the fair value of the noncontrolling interest in Seaport was \($275,000.\) The excess of acquisition cost over book value was attributed to previously unrecorded indefinite-lived intangibles, valued at \($500,000,\) and to goodwill. As of January 1, 2016, the intangibles were impaired by \($200,000\) and the goodwill was impaired by \($300,000.\) Impairment testing reveals no additional impairment of either asset in 2016. Intercompany sales for 2016 and the unconfirmed intercompany profits in the beginning and ending inventories of both companies are summarized below:

Prior to consolidation at December 31, 2016, the separate condensed trial balances of the two companies are as follows:

Required

a. Prepare a schedule to calculate total goodwill for this acquisition and its allocation to the controlling and noncontrolling interests.

b. Prepare a schedule to show how equity in net income of Seaport for 2016 was computed, and to compute noncontrolling interest in net income for 2016.

c. Prepare a working paper consolidating the trial balances of Peninsula and Seaport for 2016. Label your eliminating entries (C), (1), (E), (R), and (N).

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(in thousands) Intercompany profit in inventory, January 1, 2016. Intercompany sales to affiliate. Intercompany profit in inventory, December 31, 2016. Peninsula Industries $ 100,000 2,200,000 80,000 Seaport Company $ 60,000 3,700,000 75,000