Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2009, for $600,000 cash. Greenburg had net assets on that date of $470,000, although equipment with a 10-year life was undervalued on the records by $90,000. Any recognized goodwill is considered to have an indefinite life.

Greenburg reports net income in 2009 of $90,000 and $100,000 in 2010. The subsidiary paid div¬ idends of $20,000 in each of these two years. LO1 Financial figures for the year ending December 31, 2011, follow. Credit balances are indicated by parentheses.

Revenues ....

Cost of goods sold ...

Depreciation expense ......

Investment income ........

Net income..

Retained earnings, 1/1/11 . , .

Net income...

Dividends paid ..

Retained earnings, 12/31/11 Foxx Greenburg

$

(800,000)

$ (600,000)

100,000 150,000 300,000 350,000

(20,000)

—0“

$

(420,000)

$ (100,000)

$(1,100,000)

$ (320,000)

(420,000)

(100,000)

120,000 20,000

$(1,400,000)

$ (400,000)

Current assets.
. $ 300,000 $ 100,000 Investment in subsidiary.
. 600,000 -0-
Equipment(net).
. 900,000 600,000 Buildings (net).
. 800,000 400,000 Land.
. 600,000 100,000 Totalassets.
. $ 3,200,000 $ 1,200,000 Liabilities.
. $ (900,000)
$ (500,000)
Commonstock.
. (900,000)
(300,000)
Retainedearnings.
. (1,400,000)
(400,000)
Total liabilities and equity.
. $(3,200,000)
$(1,200,000)

a. Determine the December 31, 2011, consolidated balance for each of the following accounts:
Depreciation Expense Buildings Dividends Paid Goodwill Revenues Common Stock Equipment

b. How does the parent’s choice ofan accounting method for its investment affect the balances com¬ puted in requirement (a)?

c. Which method of accounting for this subsidiary is the parent actually using for internal reporting purposes?

d. If the parent company had used a different method of accounting for this investment, how could that method have been identified?

e. What would be Foxx’s balance for retained earnings as of January 1, 2011, if each of the follow¬ ing methods had been in use?
Initial value method Partial equity method Equity method