investment affect the balances computed in requirement (a)? Which method of accounting for this subsidiary is the parent actually using for internal reporting purposes? Determine parent's investment income for 2021 under partial equity method and equity method. What would be Foxx’s balance for retained
Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2019, for $858,000 cash. Greenburg’s accounting records showed net assets on that date of $717,000, although equipment with a 10-year remaining life was undervalued on the records by $60,000. Any recognized
Greenburg reports net income in 2019 of $113,000 and $148,500 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.
| Foxx | Greenburg | ||||||
| Revenues | $ | (828,000 | ) | $ | (968,000 | ) | |
| Cost of goods sold | 103,500 | 242,000 | |||||
| 424,000 | 358,000 | ||||||
| Investment income | (20,000 | ) | 0 | ||||
| Net income | $ | (320,500 | ) | $ | (368,000 | ) | |
| $ | (1,234,000 | ) | $ | (638,500 | ) | ||
| Net income | (320,500 | ) | (368,000 | ) | |||
| Dividends declared | 120,000 | 20,000 | |||||
| Retained earnings, 12/31/21 | $ | (1,434,500 | ) | $ | (986,500 | ) | |
| Current assets | $ | 302,000 | $ | 159,000 | |||
| Investment in subsidiary | 858,000 | 0 | |||||
| Equipment (net) | 1,048,000 | 692,000 | |||||
| Buildings (net) | 810,000 | 592,000 | |||||
| Land | 704,000 | 117,000 | |||||
| Total assets | $ | 3,722,000 | $ | 1,560,000 | |||
| Liabilities | $ | (1,387,500 | ) | $ | (273,500 | ) | |
| Common stock | (900,000 | ) | (300,000 | ) | |||
| Retained earnings | (1,434,500 | ) | (986,500 | ) | |||
| Total liabilities and equity | $ | (3,722,000 | ) | $ | (1,560,000 | ) | |
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Determine the December 31, 2021, consolidated balance for each of the following accounts:
| Depreciation Expense | Buildings |
| Dividends Declared | Goodwill |
| Revenues | Common Stock |
| Equipment | |
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How does the parent's choice of an accounting method for its investment affect the balances computed in requirement (a)?
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Which method of accounting for this subsidiary is the parent actually using for internal reporting purposes?
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Determine parent's investment income for 2021 under partial equity method and equity method.
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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.
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