At the beginning of the current year, Packwild Tours Inc. acquired 60 percent of Snowbird Resorts' common stock for $45 million in cash and stock. The estimated fair value of the noncontrolling interest was $20 million. At the date of acquisition. Snowbird's equity accounts consisted of capital stock of $19 million and a retained earnings deficit of $4 million. Snowbird reports its identifiable net assets at amounts approximating fair value, with these exceptions: land is undervalued by $1.0 million, property (20-year remaining life) s overvalued by $5.0 million, and previously unreported technology with an indefinite life was valued at $10.0 million. For the year following acquisition, Snowbird reports net income of $80,000. Impairment testing reveals $200,000 in impairment on the technology but no impairment of other assets. Packwild reports its investment in Snowbird on its own books using the complete equity method. Note: Enter all zeros with your numerical answers, do not abbreviate your answers in thousands or in millions. Calculate the amount of goodwill originally reported for this acquisition. 44,000,000 Calculate equity in net income for the current year, reported on Packwild's books, and the noncontrolling interest in Snowbird's income, reported on the consolidated income statement. Note: Use negative signs with answers that reduce net income amounts. Snowbird's reported net income s Revaluation write-offs: Property Technology Total Equity in NI Noncontrolling Interest in NI 80,000 $222,000 x $ 148,000 x $ 250,000 $ 150,000 $ $ (200,000) S (120,000) S 100,000 ▼ (80,000)
At the beginning of the current year, Packwild Tours Inc. acquired 60 percent of Snowbird Resorts' common stock for $45 million in cash and stock. The estimated fair value of the noncontrolling interest was $20 million. At the date of acquisition. Snowbird's equity accounts consisted of capital stock of $19 million and a retained earnings deficit of $4 million. Snowbird reports its identifiable net assets at amounts approximating fair value, with these exceptions: land is undervalued by $1.0 million, property (20-year remaining life) s overvalued by $5.0 million, and previously unreported technology with an indefinite life was valued at $10.0 million. For the year following acquisition, Snowbird reports net income of $80,000. Impairment testing reveals $200,000 in impairment on the technology but no impairment of other assets. Packwild reports its investment in Snowbird on its own books using the complete equity method. Note: Enter all zeros with your numerical answers, do not abbreviate your answers in thousands or in millions. Calculate the amount of goodwill originally reported for this acquisition. 44,000,000 Calculate equity in net income for the current year, reported on Packwild's books, and the noncontrolling interest in Snowbird's income, reported on the consolidated income statement. Note: Use negative signs with answers that reduce net income amounts. Snowbird's reported net income s Revaluation write-offs: Property Technology Total Equity in NI Noncontrolling Interest in NI 80,000 $222,000 x $ 148,000 x $ 250,000 $ 150,000 $ $ (200,000) S (120,000) S 100,000 ▼ (80,000)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Equity in Net Income and Noncontrolling Interest in Net Income
At the beginning of the current year, Packwild Tours Inc. acquired 60 percent of Snowbird Resorts' common stock for $45 million in cash and stock. The estimated fair value of the noncontrolling interest was $20 million. At the date of acquisition, Snowbird's equity
accounts consisted of capital stock of $19 million and a retained earnings deficit of $4 million. Snowbird reports its identifiable net assets at amounts approximating fair value, with these exceptions: land is undervalued by $1.0 million, property (20-year remaining life)
is overvalued by $5.0 million, and previously unreported technology with an indefinite life was valued at $10.0 million. For the year following acquisition, Snowbird reports net income of $80,000. Impairment testing reveals $200,000 in impairment on the technology but
no impairment of other assets. Packwild reports its investment in Snowbird on its own books using the complete equity method.
Note: Enter all zeros with your numerical answers, do not abbreviate your answers in thousands or in millions.
a. Calculate the amount of goodwill originally reported for this acquisition.
$ 44,000,000
b. Calculate equity in net income for the current year, reported on Packwild's books, and the noncontrolling interest in Snowbird's income, reported on the consolidated income statement.
Note: Use negative signs with answers that reduce net income amounts.
Noncontrolling
Interest in NI
Total
Equity in NI
Snowbird's reported net income $
80,000
$ 222,000 x $
148,000 x
Revaluation write-offs:
Property
Technology
$ 250,000
$ (200,000)
130,000
$ 150,000
$ (120,000)
$
100,000
$
(80,000)
222,000 * $
148,000 x
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