On January 2, 2014, Allen Shoes acquired 60% of the stock of Danner Footwear. It

Question

On January 2, 2014, Allen Shoes acquired 60% of the stock of Danner Footwear. It is now December 31, 2017, four years since the acquisition. Allen uses the complete equity method to account for its investment in Danner. Danner’s assets and liabilities were reported at amounts approximating fair value, except for previously unreported indefinite life identifiable intangible assets valued at $20,000. These intangible assets were impaired by $5,000 during the years 2014-2016, and are impaired by $1,000 during 2017. The goodwill recognized for this acquisition was $62,500, split between Allen and the noncontrolling interest in a 70:30 ratio. There has been no goodwill impairment during 2014-2016, but testing reveals goodwill impairment of $1,200 in 2017. Danner reported net income of $3,500 for 2017. Required a) Calculate 2017 equity in net income b) Calculate 2017 noncontrolling interest in net income.

Explanation / Answer

Details Total Allen Shoes share share of Non Controlling Interest Share in Danner Footwear 60% 40% 2017 Intangible asset impairment 1000                                 600                     400 2017 Goodwill impairment 1200                                 840                     360 (70:30 Share) Danner Net Income 2017 3500                             2,100                  1,400 Less : Intangible asset impairment 2017                                 600                     400 Less :2017 Goodwill impairment                                 840                     360 Net Income                                 660                     640 So net Equity Income Allen shoes = $             660.00 Net Income to minority interest $             640.00

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