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Perkins Company acquired 100% of Schultz Company on January 1, 2017, for $161,500. On December 31, 2017, the companies prepared the following trial balances:
Perkins Company acquired 100% of Schultz Company on January 1, 2017, for $161,500. On December 31, 2017, the companies prepared the following trial balances: Perkins Schultz Cash $ 25,000 $ 30,000 Inventory Investment in Schultz Company Land Cost of Goods Sold Other Expense Dividends Declared Total Debits Accounts Payable Capital Stock Other Contributed Capital 105,000 97,500 222,000 -0- 111,000 97,000 225,000 59,500 40,000 40,000 15,000 10,000 $743,000 $334,000 $ 72,500 160,000 $ 17,500 75,000 35,000 17,500 Retained Earnings, 1/1 25,000 54,000 Sales 380,000 170,000 Equity in Subsidiary Income 70,500 Total Credits $743,000 $334,000 Required: A. What method is being used by Perkins to account for its investment in Schultz Company? How can you tell?
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