On January 1, 2018, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for $9

On January 1, 2018, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for $91,700,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $6,300,000. Starfruit’s book value was $13,000,000 at the date of acquisition. Starfruit’s assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $25,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $40,000,000 and 5-year life, straight-line, which were capitalized following GAAP.

Additional information

Pomegranate uses the complete equity method to account for its investment in Starfruit on its own books. Goodwill recognized in this acquisition was impaired by a total of $2,000,000 in 2018 and 2019, and by $500,000 in 2020. It is now December 31, 2020, the accounting year-end. Here is Starfruit Company’s trial balance at December 31, 2020: Dr (Cr) Current assets $28,200,000 Plant & equipment, net 188,000,000 Intangibles 2,000,000 Liabilities (180,000,000) Capital stock (1,000,000) Retained earnings, January 1 (29,500,000) Acumulated other comprehensive income, January 1 (500,000) Dividends 400,000 Sales revenue (24,000,000) Cost of goods sold 10,000,000 Operating expenses 6,500,000 Other comprehensive income (100,000) $ 0

On the 2020 consolidated income statement, the noncontrolling interest in net income of Starfruit is

$150,000

$175,000

$200,000

$750,000