On Portlands December 31, 2017, trial balance, what is the balance in its Investment in Salem account,
Question:
On Portland’s December 31, 2017, trial balance, what is the balance in its Investment in Salem account, using the complete equity method?
a. \($22,800,000\)
b. \($23,200,000 \)
c. \($23,600,000\)
d. \($27,600,000 \)
On January 1, 2014, Portland Company acquired all of Salem Company’s voting stock for \($16,000,000 \) in cash. Some of Salem’s assets and liabilities at the date of purchase had fair values that differed from reported values, as follows:
Salem’s total stockholders’ equity at January 1, 2014, was \($4,000,000.\) It is now December 31, 2017 (four years later). Salem’s retained earnings reflect the accumulation of net income less dividends; there have been no other changes in its retained earnings. Salem does not report any other comprehensive income.
Cumulative goodwill impairment to the beginning of 2017 is \($2,000,000,\) Goodwill impairment for 2017 is \($500,000.\) Portland uses the complete equity method to account for its investment. The December 31, 2017, trial balance for Salem appears below.
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