QUW

QUESTION When switching to the equity method retained earning is credited for ? When switching from the equity method, the gain is credited for?

Problem 2 Parent bought some shares of Subsidiary on December 31, 20xo, as indicated below. 3,600 $ Number of shares acquired Fair value per share December 31, 20X0 December 31, 20X1 Useful life of equipment Note payable Term Interest rate Tax rate 8.20 9.80 10 6 4.90% 30.00% Excess Cash Accounts receivable Other current assets Equipment Accumulated depreciation Goodwill Total Book Value $ 49,500 $ 124,200 188,600 444,000 (169,000) Fair Value 49,500 $ 124,200 188,600 344,000 69,000 53,800 760,100 $ 53,800 122,800 $ 637,300 $ $ Accounts payable Other liabilities Notes payable Common stock($1 par) Additional paid-in capital Retained earnings Total 67,300 $ 134,600 241,000 36,000 77,700 80,700 637,300 $ 67,300 $ 134,600 263,000 295,200 22,000 100,800 760,100 $ 122,800 Assume Parent has been using the fair value method. On January 1, 20x2, Parent acquired additioinal shares as indicated below, and switched to the equity method. Number of additional shares acquired Purchase price per share 5,040 9.80 $ B This problem is independent of the first problem. Assume Parent has been using the equity method. On January 1, 20x2, Parent sold shares as indicated below, and switched to the fair value method. Shares sold Sales price 1,440 9.80 $ When switching to the equity method, retained earnings is credited for When switching from the equity method, the gain is credited for