Question
Herbert, Inc., acquired all of Rambis Companys outstanding stock on January 1, 2020, for $574,000 in cash. Annual excess amortization of $12,000 results from this
Herbert, Inc., acquired all of Rambis Companys outstanding stock on January 1, 2020, for $574,000 in cash. Annual excess amortization of $12,000 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $400,000, and Rambis reported a $200,000 balance. Herbert reported internal net income of $40,000 in 2020 and $50,000 in 2021 and declared $10,000 in dividends each year. Rambis reported net income of $20,000 in 2020 and $30,000 in 2021 and declared $5,000 in dividends each year.
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Assume that Herberts internal net income figures do not include any income from the subsidiary.
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If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2021?
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Would the amount of consolidated retained earnings change if the parent had applied either the initial value or partial equity method for internal accounting purposes?
page 134
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Under each of the following situations, what is the Investment in Rambis account balance on Herberts books on January 1, 2021?
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The parent uses the equity method.
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The parent uses the partial equity method.
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The parent uses the initial value method.
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Under each of the following situations, what is Entry *C on a 2021 consolidation worksheet?
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The parent uses the equity method.
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The parent uses the partial equity method.
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The parent uses the initial value method.
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