Question
Herbert, Inc., acquired all of Rambis Companys outstanding stock on January 1, 2014, for $652,000 in cash. Annual excess amortization of $13,700 results from this
Herbert, Inc., acquired all of Rambis Companys outstanding stock on January 1, 2014, for $652,000 in cash. Annual excess amortization of $13,700 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $498,000, and Rambis reported a $232,000 balance. Herbert reported internal net income of $44,750 in 2014 and $58,350 in 2015 and declared $10,000 in dividends each year. Rambis reported net income of $23,300 in 2014 and $36,900 in 2015 and declared $5,000 in dividends each year. |
Assume that Herberts internal net income figures above do not include any income from the subsidiary. |
a-1. | If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2015? |
a-2. | What would be the amount of consolidated retained earnings on December 31, 2015, if the parent had applied either the initial value or partial equity method for internal accounting purposes? |
b. | Under each of the following situations, what is the Investment in Rambis account balance on Herberts books on January 1, 2015? |
c. | Prepare entry *C for each of the following methods. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) | |
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