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1.) Compute and discuss the difference in invesment income for Parent Company by comparing the results of the Cost method versus results if the compnay
1.) Compute and discuss the difference in invesment income for Parent Company by comparing the results of the Cost method versus results if the compnay uses the Equity method. Parent Company acquired 90% of Son Inc. on January 31, 20X2 in exchange for cash. The book value of Son's individual assets and liabilities approximated their acquisition-date fair values. On the date of acquisition, Son reported the following: Cash $ 350,000 Current Liabilities $ 120,000 Inventory 100,000 Plant Assets (net) 320,000 Common Stock 100,000 Property 500,000 Retained Earnings 1,050,000 Total Asses $1,270,000 Total Liabilities & Equity $ 1,270,000 During the year Son Inc. reported $310,000 in net income and declared $15,000 in dividends. Parent Company reported $520,000 in net income and declared $25,000 in dividends. Parent accounts for their investment using the equity method
1.) Compute and discuss the difference in invesment income for Parent Company by comparing the results of the Cost method versus results if the compnay uses the Equity method.
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