Consolidation Working Paper Eliminations, Intercompany Merchandise Sales, Noncontrolling Interest Paymore Shoes acquired 80 percent of the...

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Consolidation Working Paper Eliminations, Intercompany Merchandise Sales, Noncontrolling Interest Paymore Shoes acquired 80 percent of the voting stock of Spire Footwear on February 1, 2020, for $21 million. The fair value of the noncontrolling interest at the acquisition date was $3 million. The excess of Spire's fair value over its $4 million book value was attributed to limited-life identifiable intangible assets ($5 million, 5-year life) and goodwill. Paymore's fiscal year ends January 31. As of February 1, 2023, the goodwill and identifiable intangibles are not impaired. There is no impairment of either intangible in fiscal 2024. Spire transfers merchandise to Paymore on a regular basis, at a markup of 25% on cost. Following is information on intercompany merchandise transactions for fiscal 2024: Balance in Paymore's beginning inventory, purchased from Spire, $1,000,000. Balance in Paymore's ending inventory, purchased from Spire, $750,000. Total sales from Spire to Paymore, at the price charged to Paymore, $25 million. Paymore uses the complete equity method to account for its investment in Spire on its own books. The separate trial balances for Paymore and Spire at January 31, 2024, are below. Paymore Dr (Cr) $10,000 Spire Dr (Cr) (in thousands) Current assets Plant and equipment, net Intangibles Investment in Spire Liabilities Capital stock $4,500 1,200,000 750,000 101,360 22,080 (945,000) (745,000) (28,000) (3,000) Retained earnings, beginning (340,000) (5,000) Sales revenue Equity in net income (1,200,000) (300,000) (440) Cost of sales 980,000 200,000 Operating expenses 200,000 98,500 Total $0 $0 Required a. Calculate the allocation of goodwill between controlling and noncontrolling interests. Enter answers in thousands. (in thousands) Goodwill Allocation to controllling interests $ $ Allocation to noncontrolling interests $ b. Calculate equity in net income, appearing on Paymore's separate books ($440,000), and the noncontrolling interest in net income for fiscal 2024. Enter answers in thousands ($440,000 equals $440 in thousands) Use a negative sign with answers that reduce net income amounts. (in thousands) Spire's reported net income Total Equity in NI Noncontrolling interest in NI $ 0 $ 0 $ 0 Revaluation write-off: Identifiable intangibles 0 0 0 Intercompany transactions: Confirmed profit on upstream beg. inventory 0 0 0 Unconfirmed profit on upstream end. inventory 0 0 0 $ 0 $ 0 $ 0 c. Prepare a working paper to consolidate the January 31, 2024, trial balances of Paymore and Spire. Label your eliminating entries (C), (I), (E), (R), (O), and (N). Enter answers in thousands ($440,000 equals $440 in thousands) Use negative signs with Cr (credit) answers in the Consolidated Balances Dr(Cr) column. Consolidation Working Paper Trial Balances Taken From Books Eliminations Consolidated Balances Paymore Spire (in thousands) Dr (Cr) Dr (Cr) Debit Credit Dr (Cr) Current assets $10,000 $4,500 0 (1-2) $ 0 Plant and equipment, net 1,200,000 750,000 0 Intangibles 101,360 (R) 0 0 (0) 0 Investment in Spire 22,080 0 (C) 0 0 (E) 0 (R) Goodwill (R) 0 0 Liabilities (945,000) (745,000) 0 Capital stock (28,000) (3,000) (E) 0 0 Retained earnings, beg. (340,000) (5,000) (1-1) 0 0 (E) 0 Noncontrolling interest -- -- 0 (E) 0 0 (R) 0 (N) Sales revenue (1,200,000) (300,000) (1-3) 0 0 Equity in net income of Spire (440) -- (C) 0 0 Cost of sales 980,000 200,000 (1-2) 0 0 (1-1) 0 0 (1-3) Operating expenses 200,000 98,500 (0) 0 0 Noncontrolling interest in NI -- (N) 0 0 $-- $-- LA $ 0 $ 0 LA $ 0 Consolidation Working Paper Eliminations, Intercompany Merchandise Sales, Noncontrolling Interest Paymore Shoes acquired 80 percent of the voting stock of Spire Footwear on February 1, 2020, for $21 million. The fair value of the noncontrolling interest at the acquisition date was $3 million. The excess of Spire's fair value over its $4 million book value was attributed to limited-life identifiable intangible assets ($5 million, 5-year life) and goodwill. Paymore's fiscal year ends January 31. As of February 1, 2023, the goodwill and identifiable intangibles are not impaired. There is no impairment of either intangible in fiscal 2024. Spire transfers merchandise to Paymore on a regular basis, at a markup of 25% on cost. Following is information on intercompany merchandise transactions for fiscal 2024: Balance in Paymore's beginning inventory, purchased from Spire, $1,000,000. Balance in Paymore's ending inventory, purchased from Spire, $750,000. Total sales from Spire to Paymore, at the price charged to Paymore, $25 million. Paymore uses the complete equity method to account for its investment in Spire on its own books. The separate trial balances for Paymore and Spire at January 31, 2024, are below. Paymore Dr (Cr) $10,000 Spire Dr (Cr) (in thousands) Current assets Plant and equipment, net Intangibles Investment in Spire Liabilities Capital stock $4,500 1,200,000 750,000 101,360 22,080 (945,000) (745,000) (28,000) (3,000) Retained earnings, beginning (340,000) (5,000) Sales revenue Equity in net income (1,200,000) (300,000) (440) Cost of sales 980,000 200,000 Operating expenses 200,000 98,500 Total $0 $0 Required a. Calculate the allocation of goodwill between controlling and noncontrolling interests. Enter answers in thousands. (in thousands) Goodwill Allocation to controllling interests $ $ Allocation to noncontrolling interests $ b. Calculate equity in net income, appearing on Paymore's separate books ($440,000), and the noncontrolling interest in net income for fiscal 2024. Enter answers in thousands ($440,000 equals $440 in thousands) Use a negative sign with answers that reduce net income amounts. (in thousands) Spire's reported net income Total Equity in NI Noncontrolling interest in NI $ 0 $ 0 $ 0 Revaluation write-off: Identifiable intangibles 0 0 0 Intercompany transactions: Confirmed profit on upstream beg. inventory 0 0 0 Unconfirmed profit on upstream end. inventory 0 0 0 $ 0 $ 0 $ 0 c. Prepare a working paper to consolidate the January 31, 2024, trial balances of Paymore and Spire. Label your eliminating entries (C), (I), (E), (R), (O), and (N). Enter answers in thousands ($440,000 equals $440 in thousands) Use negative signs with Cr (credit) answers in the Consolidated Balances Dr(Cr) column. Consolidation Working Paper Trial Balances Taken From Books Eliminations Consolidated Balances Paymore Spire (in thousands) Dr (Cr) Dr (Cr) Debit Credit Dr (Cr) Current assets $10,000 $4,500 0 (1-2) $ 0 Plant and equipment, net 1,200,000 750,000 0 Intangibles 101,360 (R) 0 0 (0) 0 Investment in Spire 22,080 0 (C) 0 0 (E) 0 (R) Goodwill (R) 0 0 Liabilities (945,000) (745,000) 0 Capital stock (28,000) (3,000) (E) 0 0 Retained earnings, beg. (340,000) (5,000) (1-1) 0 0 (E) 0 Noncontrolling interest -- -- 0 (E) 0 0 (R) 0 (N) Sales revenue (1,200,000) (300,000) (1-3) 0 0 Equity in net income of Spire (440) -- (C) 0 0 Cost of sales 980,000 200,000 (1-2) 0 0 (1-1) 0 0 (1-3) Operating expenses 200,000 98,500 (0) 0 0 Noncontrolling interest in NI -- (N) 0 0 $-- $-- LA $ 0 $ 0 LA $ 0