Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Determining ending consolidated balances in the third year following the acquisition-Cost method Assume a parent company acquired a subsidiary on January 1, 2017, for $1,250,000.

image text in transcribedimage text in transcribed

Determining ending consolidated balances in the third year following the acquisition-Cost method Assume a parent company acquired a subsidiary on January 1, 2017, for $1,250,000. The purchase price was $900,000 in excess of the subsidiary's $350,000 book value of Stockholders' Equity on the acquisition date. Of this excess purchase price, $650,000 was assigned to Property, plant and equipment with a remaining economic useful life of 10 years, and $250,000 was assigned to Goodwill. On the acquisition date, the subsidiary reported retained earnings equal to $80,000. The parent uses Investment cost method of pre consolidation Equity investment bookkeeping. The financial statements of the parent and its subsidiary for the year ended December 31, 2019, are as follows: Parent Subsidiary Parent Subsidiary Income statement: Balance sheet: Sales $2,400,000 $1,050,000 Assets Cost of goods sold (1,300,000) (590,000) Cash $1,100,000 $150,000 Gross profit 1,100,000 460,000 Accounts receivable 1,500,000 240,000 Investment income 50,000 Inventory 2,400,000 570,000 Operating expenses (600,000) (290,000) Equity investment 1,000,000 Net income $550,000 $170,000 Property, plant and equipment (PPE), net 4,000,000 1,000,000 $10,000,000 $1,960,000 Statement of retained earnings: BOY retained earnings $1,500,000 $ 500,000 Liabilities and stockholders' equity Net income 550,000 170,000 Accounts payable $1,000,000 $170,000 Dividends (250,000) (50,000) Accrued liabilities 800,000 200,000 Ending retained earnings $1,800,000 $620,000 Long-term liabilities 3,000,000 700,000 Common stock 500,000 120,000 APIC 2,900,000 150,000 Retained earnings 1,800,000 620,000 $10,000,000 $1,960,000 At what amount will the following accounts appear in the consolidated financial statements for the year ended December 31, 2019? Amount 0 0 0 0 Account a. Sales b. Investment Income $ C. Operating expenses $ d. Inventories $ e. Equity investment $ f. PPE, net $ $ h. Common Stock $ i. Retained Earnings $ 0 0 g. Goodwill 0 0 0

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Environmental Audit And Business Strategy Financial Times

Authors: Grant Ledgerwood

1st Edition

0273038508, 978-0273038504

More Books

Students also viewed these Accounting questions

Question

image filter

Answered: 1 week ago