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Foxx Corporation acquired all of Greenburg Companys outstanding stock on January 1, 2016, for $724,000 cash. Greenburgs accounting records showed net assets on that date

Foxx Corporation acquired all of Greenburg Companys outstanding stock on January 1, 2016, for $724,000 cash. Greenburgs accounting records showed net assets on that date of $560,000, although equipment with a 10-year life was undervalued on the records by $87,500. Any recognized goodwill is considered to have an indefinite life.

Greenburg reports net income in 2016 of $108,500 and $121,000 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 $ (996,000) $ (804,000)
Cost of goods sold 124,500 201,000
Depreciation expense 366,000 359,000
Investment income (20,000) 0
Net income $ (525,500) $ (244,000)
Retained earnings, 1/1/18 $ (1,236,000) $ (328,000)
Net income (525,500) (244,000)
Dividends declared 120,000 20,000
Retained earnings, 12/31/18 $ (1,641,500) $ (552,000)
Current assets $ 391,000 $ 104,000
Investment in subsidiary 724,000 0
Equipment (net) 986,000 602,000
Buildings (net) 976,000 552,000
Land 610,000 142,000
Total assets $ 3,687,000 $ 1,400,000
Liabilities $ (1,145,500) $ (548,000)
Common stock (900,000) (300,000)
Retained earnings (1,641,500) (552,000)
Total liabilities and equity $ (3,687,000) $ (1,400,000)

A. Determine the December 31, 2018, consolidated balance for GOODWILL:

B. Determine parent's investment income for 2018 under partial equity method and equity method.

C. What would be Foxxs balance for retained earnings as of January 1, 2018, if each of the following methods had been in use?

image text in transcribed

d. e. Investment Retained Income Earnings $ 1,236,000 $ Initial value method Partial equity method Equity method

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