On January 1, 2014, Allen Shoes acquired 60% of the stock of Danner Footwear. It

Question

On January 1, 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
as 70% and 30% respectively. 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 and Other Comprehensive
Income of $100 for 2017.
Required
a. Calculate 2017 equity in net income and noncontrolling interest in net income.

Explanation / Answer

Equity in Net Income NonControlling interest in Net Income Daner's reported Net Income 2,100 1,400 3,500 ; 60:40 Identifiable intangibles impairment for 2017 600 400 1,000 ; 60:40 Goodwill Impairment 840 360 1,200 ; 70:30 Total 3,540 2,160

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