Panerai acquired 6.5% of Stefanel's voting stock for $31,550 in cash on January

Topic: Consolidatio n in subsequent years, noncontrolli n g interest
LO 2

(All dollar amounts are in thousands)
Panerai acquired 6.5% of Stefanel's voting stock for $31,550 in cash on January 1, 2015, when
Stefanel's book value was $5,000. The fair value of the noncontrolling interest at the date of
acquisition was $11,450, and all of Stefanel's assets and liabilities were reported at fair value,
except for the following items:
Date of
Acquisition
Book Value
Plant & equipment, net
Identifiable intangible : leaseholds

Date of
Acquisition
Fair Value

$ 4,000
1
8,000

$ 20,000
0

Remaining Life
at Date of
Acquisition

16 yea rs
6 years

The leaseholds meet GAAP requirement s for capita lization. All depreciation and amortization is
straight-line. There is no impairment of pla nt & equipment or identifiable intangibles in 2015,
2016, or 2017. Total impairment of goodwill arising from this acquisition for the years 2015 and
2016 is $2,000. Goodwill impairment for 2017 is $2,500.
You are preparing the consolidated financial statements f?r 2017 (third year since acquisition) .
The trial balances of Panerai and Stefanel at December 31, 2017 appear in the consolidation
working paper below. Panerai uses the complete equity method to report its investment on its
own books.

Current assets
Plant & equipment, net
Identifiable intangible as sets

Panerai
Dr (Cr)
$ 26,000
140,000
-

Investment in Stefanel

Stefanel
Dr (Cr)
$ 7,000
90,000

Dr

Cr

Consol.
Dr (Cr)

-

--

30,970

-

--

Total liabilities
Capital stock
Retained earnings, beginning
Accumulated other comprehensive
loss (income), beginning
Noncontrolling interest

(148,690)
(5,000)
( 25,260)
(850)

(81,700)
( 2,000)
(6,000)
500

-

-

Sales revenue
AFS investments (gains)/losses ( OCI)

(150,000)
(275)

(50,000)
200

(2,025)
130
120,000
15,000

-

Goodw ill

Equity in income of Stefa nel
Equity in OCL of Stefan el
Cost of goods sold
Operating expenses

-

30,000
12,000

Noncontrolling interest in income

--

-·

Noncontrolling interest in OCI
Total

-

-·

$.

0

$

0

-

Required:

a.

Calculate the total goodwill originally recognized for this acquisition, and its allocation to the
controlling interest and the noncontrolling interest.
b. Calculate 2017 equity in net income of Stefanel, reported on Panerai's books, and

noncontrolling interest in consolidated net income, reported on the 2017 consolidated income
statement.
c. Using the CERON method,prepare the entries needed for the consolidation working paper.
d. Prepare and complete the consolidation working paper needed to consolidate the trial balances
of Panerai and Stefanel at December 31,2017. Be sure to label your adjusting/elimination
entries with the appropriate letter (CERON).
e.

Present, in good form, the consolidated statement of income and comprehensive income for
2017.

GENERAL INSTRUCTIONS:

1. Items a. through e. above must be prepared in Excel and cells that are the result of calculations
must be defined by a formula. Do not simply use Excel as a typewriter. Failure to follow these
instructions will result in the assignment not being graded. Please have a total for each column
at the bottom of the column.
2. Submit the assignment in Canvas in the Excel format, not a pdf of your solution.
3. Attach the "Academic Dishonesty" statement to your solution. It may be submitted in a Word
document or as a pdf of the document