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CASE 3: [12.5 Marks] Foxx Corporation acquired all of Greenburg Company's outstanding stock on January 1, 2016, for $600,000 cash. Greenburg's accounting records showed net

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CASE 3: [12.5 Marks] Foxx Corporation acquired all of Greenburg Company's outstanding stock on January 1, 2016, for $600,000 cash. Greenburg's accounting records showed 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 2016 of 90,000 and $100,000 in 2017. The subsidiary declared dividends of $20,000 in each of these two years. Account balances for the year ending December 31, 2018, follow. Credit balances are indicated by parentheses. Foxx Greenburg Revenues S (800,000) $ (600,000) Cost of goods sold 100,000 150,000 Depreciation expense 300,000 350,000 Investment income (20,000) Net income S (420,000) $ (100,000) Retained earnings, 1/1/18 (1.100.000) $ (320,000) Net income (420,000) (100,000) Dividends declared 120,000 20.00 Retained earnings, 12/31/18501.400.000 S (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 600.000 100.00 Total assets S 3,200,000 5 1,200,000 Liabilities $ (900,000) 5 (500,000 Common stock (900,000) (300,000 Retained carnings (1.400.000) (400.000 Total liabilities and equity $(3,200,000 ) S(1,200,000) 1 1. Determine the December 31, 2018, consolidated balance for each of the following accounts: [6 and1/2 Marks Depreciation Expense Dividends Declared Revenues Equipment Buildings Goodwill Common Stock 1 2. How does the parent's choice of an accounting method for its investment affect the balances computed in requirement (a)? (1/2 Mark] 3. Which method of accounting for this subsidiary is the parent actually using for internal reporting purposes? (1/2 Mark] 4. Determine parent's investment income for 2018 under partial equity method and equity method. 11 Mark] 5. What would be Foxx's balance for retained earnings as of January 1, 2018, if each of the following methods had been in use? [4 Marks) Initial value method. Partial equity method Equity method

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