Foxx Corporation acquired all of Greenburg Company's outstanding stock on January 1, 2019, for $743,000 cash. Greenburg's accounting records showed net assets on that date of $609,000, although equipment with a 10-year remaining life was undervalued on the records by $59,500. Any recognized goodwill is considered to have an indefinite life. Greenburg reports net income in 2019 of $125,000 and $127,500 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. Greenburg $ (920,000) 230,000 425,000 Foxx $(1,184,000) 148,000 392,000 (20,000) $ (664,000) $(1,140,000) (664,000) 120,000 Revenues Cost of goods sold Depreciation expense Investment income Net income $ (265,000) Retained earnings, 1/1/21 24 (521,500) (265,000) 20,000 Net income Dividends declared Retained earnings, 12/31/21 $(1,684,000) $ (766, 500) 24 328,000 743,000 1,022,000 844,000 652,000 Current assets 152,000 Investment in subsidiary Equipment (net) Buildings (net) Land 798,000 418,000 161,000 $ 3,589,000 $(1,005,000) (900,000) |(1,684,000) $(3,589,000) $ 1,529,000 $ (462,500) ( 300,000) (766, 500) $(1,529,000) Total assets Liabilities Common stock Retained earnings Total liabilities and equity a. Determine the December 31, 2021, consolidated balance for each of the following accounts:

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 11P

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b. How does the parent's choice of an accounting method for its investment affect the balances computed in requirement (a)?
c. Which method of accounting for this subsidiary is the parent actually using for internal reporting purposes?
d. Determine parent's investment income for 2021 under partial equity method and equity method.
e. What would be Foxx's balance for retained earnings as of January 1, 2021, if each of the following methods had been in use?
Initial value method.
• Partial equity method.
Equity method.
Complete this question by entering your answers in the tabs below.
Req A
Req B and C
Req D and E
Determine the December 31, 2021, consolidated balance for each of the following accounts: (Input all amount as positive
values.)
Consolidated
Balances
Depreciation expense
Dividends declared
Revenues
Equipment
Buildings
Goodwill
Common stock

Foxx Corporation acquired all of Greenburg Company's outstanding stock on January 1, 2019, for $743,000 cash. Greenburg's
accounting records showed net assets on that date of $609,000, although equipment with a 10-year remaining life was undervalued
on the records by $59,500. Any recognized goodwill is considered to have an indefinite life.
Greenburg reports net income in 2019 of $125,000 and $127,500 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.
Greenburg
$ (920,000)
230,000
425,000
Foxx
$(1,184,000)
148, 000
392,000
(20,000)
$ (664,000)
$(1,140,000)
(664,000)
Revenues
Cost of goods sold
Depreciation expense
Investment income
Net income
$ (265,000)
Retained earnings, 1/1/21
Net income
(521,500)
(265,000)
20,000
Dividends declared
120,000
Retained earnings, 12/31/21
$(1,684,000)
$ (766, 500)
328,000
743,000
1,022,000
844,000
652,000
$ 3,589,000
$(1,005,000)
(900,000)
|(1,684,000)
$(3,589,000)
Current assets
2$
152,000
Investment in subsidiary
Equipment (net)
Buildings (net)
Land
798,000
418,000
161,000
$ 1,529,000
$ (462,500)
( 300,000)
(766, 500)
$(1,529,000)
Total assets
Liabilities
Common stock
Retained earnings
Total liabilities and equity
a. Determine the December 31, 2021, consolidated balance for each of the following accounts:

Expert Solution

Step 1

Solution:

Since As per Chegg's guidelines each question is answered to a maximum of four sub parts. Please resubmit remanining, if any.

Purchase price, $	743,000
Book value (given), $	(609,000)
Price in excess of book value	134,000
		Life	Annual Excess amortizations
Allocation to equipment based on difference in market value and book value	59,500	10	5,950
Goodwill	74,500	indefinite
Total	$134,000		$5,950

	Consolidated balances, $
Depreciation expense ($392,000+$425,000+$5,950)	$6,767,000
Dividends declared	120000
Revenues	2,104,000
Equipment	1,913,650
Buildings	1,262,000
Goodwill	74,500
Common stock	900000

Depreciation expense = book value of Foxx + book value of Greenburg+amortization expense = 392,000+425,000+5,950=$6,767,000

Dividends declared = book value of Foxx = 120000

Revenues = book value of Foxx + book value of Greenburg = 1,184,000+920,000=$2,104,000

Equipment= book value of Foxx+ book value of Greenburg + excess allocation+ amortization expense(3 years) = 1,074,000+798,000+59,500-(5,950*3) = 1,913,650.

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