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