Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2019, for $662,000 cash. Greenburg’s accounting records showed net assets on that date of $490,000, although equipment with a 10-year remaining life was undervalued on the records by $99,500. Any recognized goodwill is considered to have an indefinite life. Greenburg reports net income in 2019 of $106,000 and $133,000 in 2020. The subsidiary declared dividends of $20,000 in each of these two years. Account balances for the year ending December 31, 2021, follow. Credit balances are indicated by parentheses. Foxx Greenburg Revenues $ (912,000 ) $ (764,000 ) Cost of goods sold 114,000 191,000 Depreciation expense 370,000 406,000 Investment income (20,000 ) 0 Net income $ (448,000 ) $ (167,000 ) Retained earnings, 1/1/21 $ (1,204,000 ) $ (389,000 ) Net income (448,000 ) (167,000 ) Dividends declared 120,000 20,000 Retained earnings, 12/31/21 $ (1,532,000 ) $ (536,000 ) Current assets $ 342,000 $ 103,000 Investment in subsidiary 662,000 0 Equipment (net) 1,094,000 640,000 Buildings (net) 922,000 412,000 Land 708,000 147,000 Total assets $ 3,728,000 $ 1,302,000 Liabilities $ (1,296,000 ) $ (466,000 ) Common stock (900,000 ) (300,000 ) Retained earnings (1,532,000 ) (536,000 ) Total liabilities and equity $ (3,728,000 ) $ (1,302,000 ) Determine parent's investment income for 2021 under partial equity method and equity method.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 25E

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Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2019, for $662,000 cash. Greenburg’s accounting records showed net assets on that date of $490,000, although equipment with a 10-year remaining life was undervalued on the records by $99,500. Any recognized goodwill is considered to have an indefinite life.

Greenburg reports net income in 2019 of $106,000 and $133,000 in 2020. The subsidiary declared dividends of $20,000 in each of these two years.

Account balances for the year ending December 31, 2021, follow. Credit balances are indicated by parentheses.

	Foxx		Greenburg
Revenues	$	(912,000	)	$	(764,000	)
Cost of goods sold		114,000			191,000
Depreciation expense		370,000			406,000
Investment income		(20,000	)		0
Net income	$	(448,000	)	$	(167,000	)
Retained earnings, 1/1/21	$	(1,204,000	)	$	(389,000	)
Net income		(448,000	)		(167,000	)
Dividends declared		120,000			20,000
Retained earnings, 12/31/21	$	(1,532,000	)	$	(536,000	)
Current assets	$	342,000		$	103,000
Investment in subsidiary		662,000			0
Equipment (net)		1,094,000			640,000
Buildings (net)		922,000			412,000
Land		708,000			147,000
Total assets	$	3,728,000		$	1,302,000
Liabilities	$	(1,296,000	)	$	(466,000	)
Common stock		(900,000	)		(300,000	)
Retained earnings		(1,532,000	)		(536,000	)
Total liabilities and equity	$	(3,728,000	)	$	(1,302,000	)
Determine parent's investment income for 2021 under partial equity method and equity method.

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