4.2 - Equity Method Income and Working Paper Eliminations

Solution is available here for U$7.50

4.2 - Equity Method Income and Working Paper Eliminations

Pace acquired Saber on January 1, 2010, attributing its $200 million excess of acquisition cost over book value to plant assets (10-year life), $160 million and to goodwill, $40 million. At that time Saber’s stockholders’ equity was $2,000 million. It is now December 31, 2011 and consolidation entries are prepared. The investment account balance on January 1, 2011 was $2,286 million. Saber reported net income of $130 million and paid dividends of $40 million in 2011. Saber paid dividends of $60 million in 2010. Goodwill is not impaired in either year.

Required

a.)      What was Sabers 2010 reported net income?

b.)     What Saber’s stockholders’ equity on January 1, 2011.

c.)      Calculate Pace’s equity income accrual for 2011, using the complete equity method.

d.)     Prepare the eliminating entries need to consolidate Pace and Saber at December 31, 2011.

e.)