Problem $2$: Palmer, a U$.$S$.$ company, acquired $90\%$ of Scala$$s voting stock for $$32,600$ in cash on January $1,2019,$ when Scala$$s book value was $$5,000.$ The fair value of the noncontrolling interest at the date of acquisition was $$2,400.$ At the date of acquisition, all of Scala$$s assets and liabilities were reported at fair value, except for the following items:

Date of Acquisition

Book Value Date of Acquisition

Fair Value Remaining Life at Date of Acquisition

Plant assets $ $20,000$ $ $8,00012$ years

Identifiable intangible: Leaseholds $020,0005$ years

The identifiable intangible meets the GAAP requirements for capitalization. All depreciation and amortization is straight$-$line. There is no impairment of plant & equipment or identifiable intangibles in $2019,2020$ or $2021.$

Total impairment of goodwill arising from this acquisition for the years $2019$ and $2020$ is $$3,000.$ Goodwill impairment for $2021$ is $$1,000.$

Scala sells inventory to Palmer at a markup of $20\%$ on cost$.$ Here is information on inventory transactions for $2021.$ Note that the amounts are the balances reported on the books, so you need to calculate markups as appropriate.

Balance

Inventory on Palmer$$s books, acquired from Scala, as of January $1,2021$ $ $2,880$

Inventory on Palmer$$s books, acquired from Scala, as of December $31,20213,600$

Total sales from Scala to Palmer, at price charged to Palmer, for $202125,000$

You are preparing the consolidated financial statements for $2021($third year since acquisition$).$ The trial balances of Palmer and Scala at December $31,2021,$ collected from the books of Palmer and Scala, are in the consolidation working paper below. Palmer uses the complete equity method to report its investment on its own books.

Required

a$.$ Calculate the total goodwill originally recognized for this acquisition, and its allocation to the controlling interest and the noncontrolling interest.

b$.$ Calculate $2021$ equity in net income of Scala, reported on Palmer$$s books, and noncontrolling interest in consolidated net income, reported on the $2021$ consolidated income statement.

c$.$ Prepare the eliminating entries needed to consolidate the $2021$ financial statements of Palmer and Scala.

d$.$ Fill in the working paper to consolidate the December $31,2021$ trial balances of Palmer and Scala. Clearly label eliminating entries $($C$),($I$),($E$),($R$),($O$),$ and $($N$).$

e$.$ Prepare the consolidated income statement and consolidated statement of comprehensive income for $2021,$ and the consolidated balance sheet for December $31,2021.$