Question

Palm Resorts acquired its 70 percent interest in Sun City on January 1, 2017, for $41,750,000. The fair value of the 30 percent noncontrolling interest at the date of acquisition was $14,750,000. Sun City’s date-of-acquisition reported net assets of $5,000,000 were carried at amounts approximating fair value, but it had unrecorded identifiable intangibles, capitalizable per ASC Topic 805, valued at $7,500,000. These intangibles are determined to have limited lives, amortized on a straight-line basis over five years. It is now December 31, 2020, and Sun City reports net income of $10,000,000.

Required

a. Calculate the amount of goodwill originally reported for this acquisition, and its allocation to the controlling and noncontrolling interests.

Enter answers in thousands (example, $41,750,000 equals $41,750 in thousands).

Total goodwill	$Answer
Allocation to controlling interests	$Answer
Allocation to noncontrolling interests	$Answer

b. Calculate equity in net income and the noncontrolling interest in net income for 2020, assuming goodwill from this acquisition is impaired by $2,000,000 in 2020.

Enter answers in thousands (example, $3,000,000 equals $3,000 in thousands).

Use negative signs with answers that reduce net income amounts.

		Total	Equity in NI	Noncontrolling Interest in NI
Sun City’s reported net income		$Answer	$Answer	$Answer
Revaluation write-offs:
Identifiable intangibles		Answer	Answer	Answer
Goodwill impairment loss		Answer	Answer	Answer
		$Answer	$Answer	$Answer

Answer 1