Question 1 Incomplete answer Marked out of 2.50 Flag question Consolidation Eliminating Entries Several Years After Acquisition On January 1, 2019, Palomar Resorts acquired 65 percent of the stock of Sahara Hotel & Casino for $41.45 million in cash and stock. The date-of-acquisition fair value of the noncontrolling interest was $13.55 million. Sahara's book value on January 1, 2019, was $4 million, consisting of $2.5 million of capital stock and $1.5 million of retained earnings. An evaluation of Sahara's assets and liabilities revealed the following: • Plant and equipment with a book value of $50 million had a fair value of $35 million. Remaining life 20 years, straight-line. • Previously unrecorded favorable lease agreements had a fair value of $5 million. Remaining life 4 years, straight-line. • Gaming licenses with a book value of $1 million had a fair value of $8 million. Remaining life 7 years, straight-line. • Deferred tax liabilities related to the nontaxable acquisition were estimated at $3 million. It is now December 31, 2023, 5 years since the acquisition. Sahara's January 1, 2023 retained earnings balance is $12 million. Goodwill impairment through the end of 2022 is $3.6 million, and goodwill impairment for 2023 is $1 million. Reversals of deferred tax liabilities through the end of 2022 are $2.2 million. During 2023, additional reversals total $300,000. Sahara reported net income of $2.55 million in 2023, and declared and paid $200,000 in dividends. In your answers below, show amounts in thousands. Required a. Calculate goodwill at the date of acquisition, and its allocation to controlling and noncontrolling interests. Enter answers in thousands ($41.45 million equals $41,450 in thousands). Total goodwill Allocation to controlling interests $ Allocation to noncontrolling interests $ 0 0 ° b. Calculate the December 31, 2023 balance for Palomar's investment in Sahara, assuming Palomar uses the complete equity method. Enter answers in thousands ($41.45 million equals $41,450 in thousands). $ 0 c. Prepare eliminating entries (C), (E), (R), (O) and (N) to consolidate the trial balances of Palomar and Sahara at December 31, 2023. Enter answers in thousands ($41.45 million equals $41,450 in thousands. $200,000 equals $200 in thousands). Ref. (C) Description Debit Credit = 0 0 ÷ 0 0 Investment in Sahara 0 0 (C) Capital stock 0 о ÷ 0 0 Investment in Sahara 0 0 (R) Gaming licenses 0 o = 0 0 Plant and equipment 0 0 Deferred tax liabilities 0 0 Investment in Sahara 0 0 ÷ 0 0 (0) Plant and equipment 0 Deferred tax liabilities 0 Amortization expense 0 o = 0 0 Depreciation expense 0 0 Tax expense 0 0 Gaming licenses 0 o ÷ 0 (N) = 0 0 0 Noncontrolling interest 0 0

Question 1 Incomplete answer Marked out of 2.50 Flag question Consolidation Eliminating Entries Several Years After Acquisition On January 1, 2019, Palomar Resorts acquired 65 percent of the stock of Sahara Hotel & Casino for $41.45 million in cash and stock. The date-of-acquisition fair value of the noncontrolling interest was $13.55 million. Sahara's book value on January 1, 2019, was $4 million, consisting of $2.5 million of capital stock and $1.5 million of retained earnings. An evaluation of Sahara's assets and liabilities revealed the following: • Plant and equipment with a book value of $50 million had a fair value of $35 million. Remaining life 20 years, straight-line. • Previously unrecorded favorable lease agreements had a fair value of $5 million. Remaining life 4 years, straight-line. • Gaming licenses with a book value of $1 million had a fair value of $8 million. Remaining life 7 years, straight-line. • Deferred tax liabilities related to the nontaxable acquisition were estimated at $3 million. It is now December 31, 2023, 5 years since the acquisition. Sahara's January 1, 2023 retained earnings balance is $12 million. Goodwill impairment through the end of 2022 is $3.6 million, and goodwill impairment for 2023 is $1 million. Reversals of deferred tax liabilities through the end of 2022 are $2.2 million. During 2023, additional reversals total $300,000. Sahara reported net income of $2.55 million in 2023, and declared and paid $200,000 in dividends. In your answers below, show amounts in thousands. Required a. Calculate goodwill at the date of acquisition, and its allocation to controlling and noncontrolling interests. Enter answers in thousands ($41.45 million equals $41,450 in thousands). Total goodwill Allocation to controlling interests $ Allocation to noncontrolling interests $ 0 0 ° b. Calculate the December 31, 2023 balance for Palomar's investment in Sahara, assuming Palomar uses the complete equity method. Enter answers in thousands ($41.45 million equals $41,450 in thousands). $ 0 c. Prepare eliminating entries (C), (E), (R), (O) and (N) to consolidate the trial balances of Palomar and Sahara at December 31, 2023. Enter answers in thousands ($41.45 million equals $41,450 in thousands. $200,000 equals $200 in thousands). Ref. (C) Description Debit Credit = 0 0 ÷ 0 0 Investment in Sahara 0 0 (C) Capital stock 0 о ÷ 0 0 Investment in Sahara 0 0 (R) Gaming licenses 0 o = 0 0 Plant and equipment 0 0 Deferred tax liabilities 0 0 Investment in Sahara 0 0 ÷ 0 0 (0) Plant and equipment 0 Deferred tax liabilities 0 Amortization expense 0 o = 0 0 Depreciation expense 0 0 Tax expense 0 0 Gaming licenses 0 o ÷ 0 (N) = 0 0 0 Noncontrolling interest 0 0

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 3P

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